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GBP/AUD Exchange Rate Edges Higher on Trade War Concerns

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Trump’s Tariff Plans Prompt Rally in GBP/AUD Exchange rate

The Pound Australian Dollar (GBP/AUD) exchange rate is beginning to edge higher this morning as fears of a possible trade war prompts markets to shed their riskier assets.

At the time of writing the GBP/AUD exchange rate is up by around 0.2%, following the release of the UK’s construction PMI.

Australian Dollar (AUD) Pressured by Trade War Fears

The Australian Dollar has found itself trending lower against the Pound and many of its over peers this morning following the announcement of the Trump administration’s plans to slap tariffs on all steel and aluminium imports.

Trumps suggests that the US has been ‘decimated by unfair trade and bad policy’ and claims that the proposals will help protect US industry and jobs.

However the move has angered many of America’s biggest trading partners, with many threatening that they would have to retaliate in kind.

This is sparking renewed concerns about the possibly of a global trade war, something that may hinder global growth and is leading markets to become more risk adverse.

Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank said;

‘The larger threat is the potential for escalating trade tensions as a result of these tariffs. A trend towards global protectionism could derail global trade and the forecast for synchronised economic growth this year.’

Sterling (GBP) Tempered by Construction PMI

Meanwhile the Pound has found only very limited gains against the ‘Aussie’ so far today as the UK’s latest construction PMI suggest that growth in the sector remains weak.

According to data published by IHS Markit, the UK’s construction PMI climbing from 50.2 to 51.4 in February, beating expectations it would only tick as high as 50.7.

While the upswing in activity was welcomed, with the index remaining so close to the 50 mark, which separates growth from contraction, it failed to grant Sterling any real strength.

GBP/AUD Forecast: May’s Brexit Speech to Prompt Sterling Volatility?

Looking ahead the GBP/AUD exchange rate may face some volatility later today as Theresa May is set to outline her plans for the next stage of Brexit talks in a key speech this afternoon.

Movement in the Pound will likely be driven by how markets react to her plans, with Sterling likely to tumble if investors fell that her aims may be unachievable.

Meanwhile AUD investors are likely to begin looking to next week’s session, with the Reserve Bank of Australia’s (RBA) latest rate decision likely to be centre stage.