GBP Makes Gains Against AUD as Trade Relations Between China and Australia are Shaken

GBP Makes Gains Against AUD as Trade Relations Between China and Australia are Shaken

Sterling has made some quite significant gains over the last 24hrs. GBPAUD has moved up from 1.90, to highs of 1.9496 on the interbank exchange.

This could be more down to Australian dollar weakness than sterling strength. Australia is coping with Covid in a far better fashion than the UK. Now that that Care Home deaths have been added to the official UK death toll and it does not make for pleasant reading with the death toll now exceeding 26k, a terribly high figure in comparison with other countries.

The Australian economy is always vulnerable in times of global economic uncertainty as it is considered a risky, commodity based currency. Australia also has a heavy reliance on China purchasing its goods and services and we saw the Aussie strengthen following news of easing of lockdown measures and China firing up its engines once more.

Coronavirus Investigation Could Damage Chinese-Australian Trading Relations

Rumours have been circulating however that Australia are fully behind a review into China’s handling of the pandemic, something that is not sitting well with the Chinese who have threatened to encourage their citizens to avoid buying goods from Australia and also avoid moving their or investing in real estate. If these threats were carried out it could have a huge impact on the Australian dollar.

PM Boris Johnson Indicates UK Lockdown Easing

Boris signposted an easing of lockdown measures which did help the pound, but there are still no dates in place as to when the easing will occur. The quicker the economy is up and running the better it is for the pound.

The pound is also not a popular destination in times of global economic uncertainty one factor for it’s lack of popularity is the huge imbalance in imports and exports. There is also the small matter of Brexit. A trade deal must be initially agreed by the end of June or we risk a potential no deal scenario.

Boris has vowed that there will be no extension to Brexit past 2020 which is causing a great deal of concern amongst investors. It maybe the case that Johnson thinks he can beat Corona both personally and collectively then come back to office and get a Brexit deal through then come out smelling of roses. Boris could be using the threat of a no deal as ammunition to get a decent deal through especially while members of the bloc are at loggerheads on emergency funding due to Covid. It is a dangerous game and while a no deal scenario still has potential the pound could remain fragile.

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