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Pound to Australian Dollar Exchange Rate Outlook: China?s President Xi Raises Uncertainty over Future US-China Trade

December 18, 2018 - Written by John Cameron

The Pound to Australian Dollar exchange rate was seen steady over Tuesday's trading session, quoted at AUD$1.7574 as Chinese President XI Jinping’s cautious talk this morning escalated fears of a renewed US-China trade war.

Investors in the Australian Dollar (AUD) were awaiting any comments from Xi that would indicate an improving trade relationship with the US.

Xi instead committed to Chinese solidarity, saying:

‘No one is in a position to dictate to the Chinese people what should or should not be done.’

This provided little support for the struggling Australian Dollar (AUD), however, with Xi’s comments being interpreted as a veiled threat aimed at US President Donald Trump.

The Pound (GBP), meanwhile, suffered yesterday after the publication of the Rightmove house price index figures for December which showed a decrease of -1.5% following on from last month’s drop of -1.7%.

GBP/AUD Rangebound as May Threatened by Opposition ‘No-Confidence’

Investors in Sterling have remained skittish this week as British Prime Minister Theresa May continues to struggle to gain support for her Brexit withdrawal deal, with opposition MPs attacking May’s pushing forward of the ‘meaningful’ vote until the 14th January.

The Labour leader, Jeremy Corbyn, tabled a motion of no-confidence in Theresa May yesterday, commenting:

‘We haven't failed to trigger any process. It's this government that is denying Parliament the right to vote on this process, that's why I tabled the motion.’

The Pound (GBP) is facing mounting pressure as May’s UK-EU withdrawal deal is increasingly coming under criticism, with last week’s trip to Brussels to renegotiate crucial aspects of her deal unsuccessful, any signs of a Brexit ‘no-deal’ are likely to dampen sentiment in Sterling.

Australian Dollar Pound (AUD/GBP) Exchange Rate Steady despite Home Sales Increasing

The Australian Dollar (AUD) was strengthened today by the release of HIA new home sales figures for November, which showed an increase at 3.6% against last month’s -0.8%.

However, the Australian Dollar (AUD) has found little relief from signs of a weakening US economy, with few investors confident enough invest in riskier currencies as geopolitical tensions remain generally uncertain.

Kit Juckes of the investment bank Société Générale, commented after last night’s decline in US stock markets:

‘After a miserable afternoon for US equities, this morning actually started in a bright mood on the other side of the world, before President Xi’s lack of any encouragement for expectations of further reform gave markets the jitters.’

Later on today will see the release of the Westpac Leading Index figures for November, with any signs of an increase lending support to the ‘Aussie’.

GBP/AUD Outlook: Brexit and US-China Trade Tensions Remain in Focus

The Pound Australian Dollar (GBP/AUD) exchange rate is likely to be driven by political forces in the coming week, with Brexit still occupying most of the attention as Theresa May rallies to gain support from an increasingly fractious Parliament for her Brexit withdrawal deal.

‘Aussie’ investors, meanwhile, will be paying attention to any signs that US-China trade tensions are calming down, with any signs of easing off bolstering the Australian Dollar.

Tomorrow, however, will see the release of a raft of UK data stats, with the most notable being the Retail Price Index figures for November, which are expected to remain static.

Following these will be the UK Consumer Price Index figure for November, which is expected to increase, further strengthening the Pound (GBP).

Thursday will see the Bank of England publish its final interest rate decision of 2018, although no rate increases are expected.

Australia will see some significant employment ecostats publications on Thursday, with any signs of a decrease likely lending strength to the GBP/AUD exchange rate.

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