GBP/AUD Exchange Rate Falls Despite Growing Concerns Over US-China Trade Relations
The Pound to Australian Dollar (GBP/AUD) exchange rate dipped, with the pairing currently fluctuating around AU$1.824.
The Australian Dollar (AUD) benefited from the release of the Australian retail sales figure for July, which jumped by 3.2% with gains in all states with exception of Victoria, which is undergoing a second wave of Covid-19 cases.
Swati Pendey, an analyst at Reuters, commented:
‘Australian retailers enjoyed another month of solid sales in July with gains seen in all states and territories except virus-stricken Victoria, however, card spending data pointed to gloomier conditions in August’.
Meanwhile, growing tensions between the US and China are holding back some of the risk-averse ‘Aussie’s gains today. This follows reports that Washington has imposed new restrictions on Chinese diplomats in the US.
US-China trade relations have become increasingly strained over issues like Huawei and the coronavirus, with China’s recent crackdown on Hong Kong and human rights violations in Xinjiang placing pressure on cooperation between the world’s two largest economies.
Pound (GBP) Sinks as UK Construction PMI Loses Steam in August
The Pound (GBP) struggled today following the release August’s UK Construction PMI, which fell unexpectedly from 58.1 to 54.6. As a result, GBP investors have become concerned for Britain’s economic recovery in the months ahead.
Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, commented on the report:
‘The momentum in the sector’s recovery hit a bump in the road in August with a sudden slowdown in output growth and tender opportunities, while employment trends remained the most fragile in a decade.
‘This stalled progress was not a surprise given the warning signs last month that any hard-won progress could start to fizzle out. As new order gains slowed across all sectors, continuing COVID-19 anxiety amongst clients meant many projects still remained on ice.’
Meanwhile, concerns over Brexit continue to drag on the GBP/AUD exchange rate. This follows the EU Chief Negotiator, Michel Barnier, expressing his disappointment in the lack of UK-EU trade negotiations.
As a result, GBP traders have become increasingly gloomy over the prospect of a possible no-deal Brexit on December 31st.
Today also saw the Bank of England’s (BoE) interest rate-setter, Michael Saunders, say more stimuls was ‘likely’.
‘I consider it quite likely that additional monetary easing will be appropriate in order to achieve a sustained return of inflation to the 2% target.’
GBP/AUD Outlook: Could the ‘Aussie’ Sink as US-China Trade Tensions Escalate?
Pound (GBP) investors will be looking ahead to Monday’s release of the UK BRC Retail Sales figure for August. If this confirms forecasts and rises from 4.3% to 5.7%, we could see Sterling claw back its losses.
The Australian Dollar (AUD) will remain sensitive to US-China trade developments next week. As a result, we could see the risk-averse ‘Aussie’ suffer if relations between Beijing and Washington deteriorate.
The GBP/AUD exchange rate could continue to remain subdued due to a lack of progress in UK-EU trade negotiations.