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Pound to Australian Dollar (GBP/AUD) Exchange Rate Steady as US-China Trade Tensions Weigh on ‘Aussie’

May 15, 2020 - Written by John Cameron

GBP/AUD Exchange Rate Rangebound as Risk-Sentiment Hit By US-China Trade Row

The Pound to Australian Dollar (GBP/AUD) exchange rate held steady today, with the pairing currently trading around AU$1.89.

The Australian Dollar (AUD) has suffered from risk-off trade today because of renewed fears of US-China trade tensions.

Today saw risk-sentiment drop after the US increased its military pressure on China as tensions rise over the coronavirus pandemic.

Senior Col. Li Huamin, a spokesman for the People’s Liberation Army Southern Theatre Command, commented in a statement:

‘China urges the United States to focus on its own business with pandemic prevention and control, make more contributions to the global fight against the Covid-19, and immediately stop military operations that are detrimental to regional security, peace and stability.’

US President Donald Trump has continued to attack Beijing, saying that China failed to stem the spread of the coronavirus while offering a lack of transparency in the early stages of the outbreak in Wuhan.

As a result, the Australian Dollar (AUD) has suffered from a sell-off of riskier assets. After all, China is Australia’s largest trading partner and any signs of tensions between the US and China leaves markets anxious over Australia’s future economic situation.

Pound (GBP) Steady as Brexit Negotiations Back in Focus

The Pound (GBP) failed to gain on the ‘Aussie’ today as UK markets turn their attention to UK-EU Brexit trade negotiations. With talks set to conclude between the two powers today, Sterling investors are becoming increasingly anxious over the possibility of a no-deal Brexit.

Tensions between the UK and EU have soured after Cabinet Minister Michael Gove said there is a ‘serious risk’ that the EU could fail to meet its duties to protect UK nations in the bloc’s member states.

Mr Gove said:

‘[There is] a serious risk that the EU will not fulfil its obligations under the withdrawal agreement by the time the transition period ends on 31 December 2020.’

Meanwhile, the British economy continues to struggle amid the coronavirus crisis. For example, yesterday saw an ONS survey which revealed that 44% of respondents said they would not last out until the ned of the year.

GBP/AUD Forecast: Could Easing Covid-19 Toll Boost Sterling Next Week?

Australian Dollar (AUD) investors will be looking ahead to Tuesday’s release of the Reserve Bank of Australia’s (RBA) meeting minutes. If the RBA is notably downbeat in its analysis of the Australian economy, then we could see the Australian Dollar suffer.

However, ‘Aussie’ traders will be looking ahead to Wednesday’s release of the Australian Westpac Leading Index for April. If this falls considerably, then this would add to Australia’s darkening economic picture.

Meanwhile, Pound (GBP) traders will be awaiting Tuesday’s publication of the UK ILO Unemployment Rate for March. If British unemployment soars, then we could see the Pound drop further.

The GBP/AUD exchange rate will continue to be driven by factors around the British coronavirus crisis. Any signs of the infection rate or death toll easing off would prove Pound-positive.

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