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Pound Australian Dollar Exchange Rate Steady, ‘Aussie’ Subdued on US-China Trade Uncertainty

November 21, 2019 - Written by John Cameron

GBP/AUD Exchange Rate Rangebound, Doubts Rise on US-China ‘Phase One’ Trade Deal

The Pound Australian Dollar (GBP/AUD) exchange rate held steady today, with the pairing currently trading around AU$1.900 as the risk-sensitive ‘Aussie’ continues to struggle on US-China trade uncertainty.

With China being Australia’s largest trading partner, concerns are rising over when a US-China ‘phase one’ trade deal could be inked this year, as tensions in Hong Kong continue to mount.

Christian Whiton, a Senior Fellow for Strategy and Trade at the Centre for the National Interest, commented:

‘The violent crackdown against protesters in Hong Kong, which Beijing is directing, decreases the odds of a deal. Is [the Chinese President] Xi really going to be invited for a grip-and-grin with the [US President Donald Trump] as his cops are beating students in Hong Kong?’

Tonight will see the release of Australia’s flash Commonwealth Bank manufacturing PMI for November, with any signs of improvement likely buoying the ‘Aussie’ as confidence in Australia’s economy returns.

GBP/AUD Exchange Rate Holds Steady as UK Public Spending Hits Five-Year High

The Pound (GBP) remained unmoved against the ‘Aussie’ following today’s release of the UK’s Public Net Borrowing figure, which showed that public spending had reached a five-year high in October.

Howard Archer, the Chief Economic Adviser at EY Item Club, said:

‘[T]he budget for 2019/20, which will presumably be held soon after the 12 December general election, looks certain to further loosen the fiscal strings given the varying promises made by both Conservatives and Labour in their campaigning. In particular, both parties are pledging to spend big on infrastructure to take advantage of record-low borrowing costs.’

UK markets have been focusing on the Labour Party’s release of its election manifesto today, with investors now digesting whether this will boost Labour’s position in the opinion polls and increase their chances of success on the 12th December general election.

With markets generally favouring the Conservatives, due to their pro-business ethic and clearer stance on Brexit, any signs of Labour’s favourability creeping up will likely weaken investor confidence in Sterling.

GBP/AUD Outlook: Could Sterling Rise on Improving Services Sector?

We could see the GBP/AUD exchange rate improve tomorrow if November’s flash Markit Services PMI emerges from contraction territory. This would boost optimism in the UK economy with the services sector being its largest.

Tomorrow will also see the publication of November’s flash Markit Manufacturing PMI, which is expected to remain lodged in contraction territory at 49.

US-China trade developments will continue to remain in focus, with any further signs of deteriorating relations between the world’s two largest economies weighing on the risk-averse ‘Aussie’.

The GBP/AUD exchange rate will continue to be driven by UK political developments, with any signs of the Labour Party’s favourability rating in polls rising seeing the Pound fall.

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