GBP/AUD Exchange Rate Rangebound despite US-China ‘Temporary Agreement’ on Trade
The Pound Australian Dollar (GBP/AUD) exchange rate steadied this morning and is currently trading around AU$1.806.
The Australian Dollar (AUD) edged higher against the Pound (GBP) following the G20 summit in which US President Donald Trump and his Chinese counterpart, Xi Jinping, agreed upon a tentative trade truce.
However, this has left some ‘Aussie’ traders remaining cautious, as negotiations are set to continue between the two superpowers.
Analysts at the political risk consultancy Eurasia Group, also emphasised caution, however, saying:
‘The temporary agreement does little to resolve the fundamental conflicts over trade issues that broke down talks in May and does not amount to a sustainable solution for Huawei.’
Today’s Chinese manufacturing PMI figures for June, which fell into contraction from 50.2 to 49.4, also held back some of the Australian Dollar’s gains today.
As China is Australia’s closest trading partner, this has raised concerns regarding Chinese economic growth.
GBP/AUD Exchange Rate Stabilises as UK Markit Manufacturing Hits Six-Year Low
The Pound (GBP), meanwhile, fell following the publication of the UK Markit Manufacturing PMI figures for June, which fell deeper into contraction from 49.4 to 48.0.
Duncan Brock, a Group Director at the Chartered Institute of Procurement and Supply, commented:
‘The sector’s strength is slowly slipping away, deprived of the oxygen of a reduction in Brexit uncertainty and an associated return of confidence to the marketplace. All the signs from the manufacturing sector point to another decline next month unless someone pulls a rabbit out of the Brexit hat.’
Brexit concerns have also weighed on market sentiment in Sterling today, following comments from Foreign Secretary and Tory leadership candidate Jeremy Hunt who said that if the UK fails to renegotiate a deal with the European Union a chaotic exit could become a reality.
Supporters of both Tory leadership candidates – Jeremy Hunt and former London Mayor Boris Johnson – have however underplayed the likelihood of a no-deal Brexit.
Liam Fox, the International Trade Secretary, said that he believed a no-deal would not likely happen.
Mr Fox commented:
‘You have got a new commission coming in, and we will have a new prime minister. The European Union have to listen to the economic realities.’
GBP/AUD Outlook: RBA Interest Rate Decision in Focus
Australian Dollar traders will be looking ahead to tomorrow’s interest rate decision from the Reserve Bank of Australia (RBA), which is expected to be cut from 1.25% to 1.00%.
Tomorrow will also see a speech by the RBA’s Governor Philip Lowe.
Any further signs of dovishness from the central bank could see the GBP/AUD exchange rate begin to rise.
Sterling traders, however, will be awaiting tomorrow’s Markit Construction PMI figures for June.
If these prove to emerge out of contraction territory, we could see the Pound begin to rise against some of its competitors.
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