In today’s Pound to Australian Dollar forecast we look at the shift in the GBP/AUD exchange rate following the recent news on trade talks between the US and China.
A trade truce between the US and China has caused quite a significant, positive movement for the Australian Dollar against the majority of major currencies. This is despite the high probability of a rate cut from the Reserve Bank of Australia (RBA) tomorrow.
Australia is heavily reliant on China purchasing it’s goods and any slow down in growth has a knock on effect on the Australian economy and in turn the Australian Dollar.
Although Donald Trump and Chinese President, Xi Jinping have agreed to a temporary truce in their trade war. Do not be fooled into thinking a deal is close to being agreed. The truce is definitely good news and shows progress, but there has been occasions before where it looked as though a deal was coming close to fruition only for President Trump to increase tariffs after he found an area of the deal that was disagreeable.
The trade war could be going on for a considerable period of time and if tariffs increase the ramifications could be wide reaching which does not bode well for the Australian Dollar.
Brexit and the lack of a Prime Minister hurt the Pound
At present Brexit woes and the lack of a Prime Minister outweigh the problems in Australia. Until we have a confirmed PM and clarity on Brexit I am afraid Sterling will remain fragile.
Boris Johnson threatening to bring a no deal Brexit back to the table to negotiate an improved deal with Brussels will cause concern for investors. The higher the probability of a no deal the weaker Sterling will become.
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