GBP/AUD Exchange Rate Falls, Could the US Hong Kong Bill Damage US-China Trade Relations?
The Pound Australian Dollar (GBP/AUD) exchange rate eased by around -0.25% today, with the pairing currently trading around AU$1.903 despite rising concerns over US-China trade relations weighing on market confidence in the risk-sensitive ‘Aussie’.
This follows US President Donald Trump’s signing into law two bills which support Hong Kong protestors, a move which has been described by China’s Ministry of Foreign Affairs as having “sinister intentions” while threatening “firm countermeasures”.
With China being Australia’s largest trading partner, this has left Australian markets feeling jittery on fears that the world’s two largest economies could fail to secure a ‘phase one’ trade deal by the end of the year.
Michael Hirson, an Analyst at Eurasia Group, was upbeat, however, saying that Trump’s of the HK bill would “not derail trade negotiations”.
Mr Hirson added:
‘To be sure, Beijing is angered at the US for interfering in what China considers its domestic affairs and for emboldening the protest movement. But some of China’s anger over the bill is posturing for the domestic audience, and Beijing will not be so upset as to let this stand in the way of a truce over trade.’
Australia’s HIA new home sales figure for October fell below forecasts today, with the figure sinking from 5.7% to -0.5%, clipping some of the ‘Aussie’s gains.
GBP/AUD Exchange Rate Sinks, UK Consumer Confidence Flat at Six-Year Low
The Pound (GBP) fell against the ‘Aussie’ today following the release of November’s UK GfK consumer confidence figure, which flatlined at -14, its worst reading in six years.
Joe Staton, Client Strategy Director at the GfK, commented:
‘The score for the general economy over the coming year has ticked up three points and this is possibly an indication that some consumers believe the imminent general election might clear the Brexit deadlock, even though this sub-measure is still in deeply negative territory… The general election is potentially an opportunity to move us out of the doldrums.’
Sterling also suffered after UK mortgage approvals fell to their lowest level since March at 65,803 in September, leaving markets feeling jittery over the future for the British economy post-Brexit.
UK politics will continue to drive the GBP/AUD exchange rate today, with any signs of the Conservatives losing their lead in the opinion polls likely to prove Pound-negative.
With two weeks left of the election campaign, however, UK markets are becoming increasingly cautious as the YouGov MRP opinion poll’s suggestion of a Tory lead is now being questioned by some analysts.
GBP/AUD Outlook: UK Politics to Remain in Spotlight
‘Aussie’ investors will be awaiting Sunday’s release of the AiG performance of manufacturing index for November, with any signs of improvement boosting optimism in Australia’s struggling economy.
Looking ahead to Monday, Australia’s building permits figure for October could further weigh on the ‘Aussie’, with the figure expected to sink from 7.6% to -4% on the month.
Sterling traders will be looking to Monday’s Markit manufacturing PMI figure for November, which is expected to remain firmly in contraction territory at 48.1.
The GBP/AUD exchange rate will continue to be driven by British political developments next week, with any signs of the Tories securing their lead in the opinion polls likely providing some uplift for Sterling.