Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks as US-China Trade Deal Optimism Rises

June 26, 2019 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Sinks as US-China Trade Deal Optimism Rises

GBP/AUD Exchange Rate Falls as Risk-Appetite Returns US-China Trade Tensions Ease

The Pound Australian Dollar (GBP/AUD) exchange rate fell by 0.4% today and is currently trading around AU$1.815 on the interbank market.

The Australian Dollar (AUD) rose against the Pound (GBP) as risk-appetite returned following comments from Steven Mnuchin, the US Treasury Secretary, which indicated a possible US-China trade deal.

Mr Mnuchin said:

‘We were about 90% of the way there [with a deal] and I think there’s a path to complete this… I’m hopeful that we can move forward with a plan. President Trump and [Chinese] President Xi have a very close working relationship. We had a productive meeting at the last G-20.’

As China IS Australia’s closest trading partner, signs of a potential trade truce between the two superpowers has bolstered market appetite for the ‘Aussie’.

Due to a lack of economic data this week, the Australian Dollar has remained highly sensitive to global political developments.

The Pound, meanwhile, fell following dovish comments from Mark Carney, the Governor of the Bank of England (BoE) today.

Mr Carney commented:

‘Rolling short-term [Brexit] uncertainty is particularly damaging for business confidence and activity.’

GBP/AUD Exchange Rate Decreases despite 3-Year High UK Mortgage Approvals

Sterling failed to benefit following the printing of the UK BBA Mortgage Approvals figures for May, which eased to 42.384k against the previous month – a three-year high.

Alastair McKee, a Managing Director at One 77 Mortgages, commented:

‘The latest mortgage approval numbers, whilst a smidgeon below forecast, have remained at a very healthy level indeed. In fact, along with the previous month, they represent some of the highest numbers since March 2017.’

Political developments, however, have remained in focus following comments from Dominick Raab, the former Brexit Secretary, that Tory leadership favourite Boris Johnson would likely ignore attempts to block a no-deal exit from the European Union.

Rory Stewart, a previous candidate in the leadership race, criticised Mr Johnson, saying:

‘He’s going to let down [Remainers and] the hard-Brexiteers because he’s not going to come out on 31 October. The problem is that on 1 November he’s going to end up with a lot of disappointed and frustrated people.’

GBP/AUD Outlook: Brexit Pessimism Rises as Boris Johnson Holds onto No-Deal Option

Australian Dollar traders will be looking ahead to the Australian Private Sector Credit figures for May on Friday, which are expected to improve.

However, the G20 summit in Osaka this week will remain in the spotlight for many ‘Aussie’ investors.

Any indications that the US and China could forge a trade deal would see the AUD/GBP exchange rate rise.

The Pound Australian Dollar (GBP/AUD) exchange rate will remain sensitive to political developments surrounding the ongoing Tory leadership race, however.

Boris Johnson has become the centre of attention as he is becoming increasingly vocal over Brexit. And any further comments that suggest he would push for a no-deal Brexit could see Sterling sink further against the ‘Aussie’.

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TAGS: Australian Dollar Forecasts Pound Australian Dollar Forecasts