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Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Muted as US-China Tensions Leave Risk-Appetite Fragile

May 9, 2019 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Flat Ahead of US-China Trade Talks

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained flat and the pairing is currently trading at an inter-bank rate of AU$1.8627.

As Chinese Vice-Premier Liu He headed to Washington for two days of face-to-face trade talks, risk appetite remained fragile which weighed on the risk-sensitive ‘Aussie’.

On Wednesday, US President Donald Trump insisted that China ‘broke the deal’.

Washington has promised to raise tariffs on $200 billion of Chinese goods to 25% from 10% if talks were unsuccessful.

Meanwhile, China’s Commerce Ministry made it clear that it will retaliate on Friday if the US imposes higher tariffs on thousands of Chinese products.

Speaking to reporters in Beijing, Commerce Ministry Spokesman, Gao Feng said:

‘China’s attitude has been consistent, and China will not succumb to any pressure. China has made preparations to respond to all kinds of possible outcomes.’

Brexit Cross-Party Talks Close to Collapse

Reports suggested that cross-party Brexit talks between the Conservatives and Labour were close to collapse.

ITV’s Political Editor Robert Peston has suggested that talks may be pronounced ‘dead’ by Labour before its EU election manifesto is launched.

Meanwhile, pressure mounted on Prime Minister Theresa May to name the date of her departure weighed on the British currency.

Commenting on the pressure for May to resign, Analyst at ACLS Global, Marshall Gittler said:

‘Since most her [May’s] likely replacements are even more hard-core ‘Leave’ supporters than she is, this raises the possibility of a hard Brexit, i.e. crashing out with no agreement at all.’

Will the Pound Australian Dollar (GBP/AUD) Exchange Rate Rally on a Dovish RBA?

Looking ahead to Friday, the Australian Dollar (AUD) could slip against Sterling (GBP) following the release of the Reserve Bank of Australia’s (RBA) monetary policy statement.

If the RBA’s statement is overly dovish hinting at a near-term interest rate cut, sentiment in the ‘Aussie’ could be dampened.

Meanwhile, the Pound could slide following the release of the UK’s preliminary Q1 GDP.

If GDP stagnates during the first quarter due to Brexit pessimism, the Pound Australian Dollar (GBP/AUD) exchange rate could fall.

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