GBP/AUD Exchange Rate Edges Higher as US-China Trade Tensions Increase
The Pound Australian Dollar (GBP/AUD) exchange rate edged higher by 0.4%, leaving the pairing fluctuating around AU$1.796.
The Australian Dollar (AUD) fell against the Pound (GBP) following the speech by the Reserve Bank of Australia’s Governor, Philip Lowe, who confirmed that he is committed to a long-term low interest rate.
Mr Lowe said:
‘If demand growth is not sufficient, the board is prepared to provide additional support by easing monetary policy further. Whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates… It is highly unlikely that we will be contemplating higher interest rates until we are confident that inflation will return to around the midpoint of the target range.’
US-China trade tensions are also causing concerns for ‘Aussie’ traders following yesterday’s report of a US warship sailing through the Taiwan Strait, with which China expressed ‘deep concerns’.
As the Australian economy is so closely tied to that of China’s, any signs of tensions rising between the US and China weighs on market sentiment in the risk-averse ‘Aussie’.
GBP/AUD Exchange Rate Rises as Focus Remains on Boris Johnson’s Cabinet Developments
The Pound (GBP) gained against the Australian Dollar (AUD) as developments surrounding the new Prime Minister Boris Johnson’s cabinet have remained in focus.
Mr Johnson has also vowed that the UK would leave the European Union on the 31 October, ‘no ifs, no buts’.
However, with his re-vamped cabinet following Theresa May’s resignation, Pound traders are becoming jittery as these prove to be a majority of hard Brexiters.
Former Tory MP Nick Boles summarised his response:
‘The hard right has taken over the Conservative Party. Thatcherites, libertarians and No Deal Brexiters control it top to bottom.’
Today also saw the publication of the CBI Distributive Trades Survey figures for July, which fell to a worse-than-expected -16% – its third consecutive fall.
Rain Newton-Smith, Chief Economist at CBI, said:
‘The UK economy has reached a fork in the road. The new Prime Minister must now do everything in his power to achieve a good Brexit deal, thus protecting jobs and our economy.’
GBP/AUD Outlook: Could Sterling Improve on New Brexit Developments?
Pound traders will be focusing on developments surrounding Boris Johnson and Brexit tomorrow.
Any further signs of a breakthrough with Brexit, however, could provide some uplift for the Pound, as this would provide some movement towards a possible resolution between the UK and the EU.
Some analysts have speculated that the GBP/AUD could rise on a ‘honeymoon’ period as discussions once again engage over the issue of Brexit.
‘Aussie’ investors, meanwhile, will be focusing on global economic and political developments, with any signs of US-China trade talks breaking down providing AUD-negative.