Pound Australian Dollar (GBP/AUD) Exchange Rate Hammered as US-China Trade Relations Improve

May 21, 2018 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Hammered as US-China Trade Relations Improve

Brexit Negotiations Leave Pound (GBP) Exchange Rates on the Back Foot

The Pound (GBP) exchange rates tumbled into Monday’s trading session, paring recent gains against the Australian Dollar (AUD) as investors reacted to news that US-China trade relations are beginning to ease.

On the Brexit front, investor anxiety is still rather high due to the issue of the customs union and the Irish border, with last week’s back-and-forth on the UK’s future failing to provide a definitive sense of direction.

Whilst securing a transition period has eased investor concerns, many are still sceptical that a deal will be achieved, meaning that a cliff-edge exit still a possibility in many people’s minds.

On the data front, today is a rather quiet one for the UK, but investors should have plenty to chew over in the coming days – including the UK’s highly anticipated consumer price inflation results (due on Wednesday).

Australian Dollar (AUD) Exchange Rates Climb as Market Risk Appetite Grows

The Australian Dollar (AUD) climbed today, supported by news that China and the US have put their ‘trade war’ on hold in order to negotiate a wider agreement.

According to a joint Sino-US statement, China has now agreed to better support US employment and growth by working to expand trade and better protect intellectual property – two major trade bugbears within the international community.

Furthermore, China Daily has claimed that everyone can breathe a sigh of relief, with China’s Chief Negotiator Vice Premier Liu He stating that talks had proven ‘positive, pragmatic, constructive and productive’.

US Treasury Secretary Steven Mnuchin shared his thoughts:

‘We’re putting the trade war on hold. Right now, we have agreed to put the tariffs on hold whilst we try to execute the framework’.

This is great news for the riskier commodity currencies like the Australian Dollar, particularly with China being their primary export market.

Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast: UK Inflation in the Spotlight

The big-mover for the Pound this week will be the UK’s inflation results, with an expected rise month-on-month from 0.1% to 0.5%.

If this occurs then it could push the Bank of England (BoE) closer to a rate rise in June, though this will also be dependent on the economy recovering from its rather disappointing performance in Q1.

Furthermore, tomorrow will feature speeches from BoE Governor Mark Carney, Dave Ramsden, Michael Saunders and Gertjan Vlieghe, with their comments, hawkish or dovish, liable to shift the GBP/AUD exchange rate up or down depending on sentiment.

For the ‘Aussie’ Dollar, RBA Philip Lowe is due to give a speech in Sydney on Wednesday, though given the recent poor performance of Australia’s unemployment figures, his decided sentiment could prove poor.

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