How the UK election, Brexit and the US China trade war is affecting GBP/AUD

PM to meet outgoing EU President Jean-Claude Juncker today

The Australian dollar has been rising in value as investors predict improvements in the sentiment towards the trade disputes with China and the US. The outlook on this has generally related to how investors view global trade, with the currency market having generally favoured the Australian dollar when it appears the global economy is performing well.

The Australian dollar is a key exporter of raw materials such as Iron Ore, Copper and also Aluminium, which are used in many Industrial processes globally. Signs therefore that the concerns over the trade war between China and the US might be abating have helped the Australian dollar to find some value.

Is the Bank of England nervous?

GBP/AUD levels have also suffered following the news that two Bank of England members voted for an interest rate cut this week. The 7-2 split wobbled sterling rates as it appears that the UK’s central bank is nervous over the outlook ahead. Expectations for the future relate to numerous concerns over Brexit and the influence on the UK’s economy.

Looking further ahead, we might find that the UK election also increases the volatility for the pound as investors try to second guess the outcomes from this important event. Historically, the pound has lost value in the run up to an election as the market has to predict the different outcomes.

How has the threat of a hung parliament affected the Sterling?

This time, it is slightly different in that the road to no-deal has become blocked with only a conservative option or Brexit Party win leading to see a no-deal exit, something the market has been very concerned about. The prospect of a hung parliament and further delay, which would remove the more immediate threat of no-deal has seen the pound hold it’s value.

Of course, with Trump and the Brexit, anything is still possible ahead and we must remember how wrong footed financial markets have been in recent years.

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