GBP/AUD Exchange Rate Steadies as Markets Spooked by US-China Trade Tensions

GBP/AUD Exchange Rate Stabilises on US-China Trade Tensions Intensify

Updated: The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate stabilised this afternoon, recouping its earlier losses as rising US-China trade tensions weighed on market risk appetite.

This saw the ‘Aussie’ retreat on Tuesday as suggestions that a trade deal will not be agreed before the 2020 President election unnerved investors

Meanwhile the continued absence of any negative Brexit headlines lent some support to the Pound this afternoon, although this upside remained limited in the as the threat of a no-deal Brexit continued to cast a shadow over the UK currency.

GBP/AUD Exchange Rate Dented as RBA Leaves Rates on Hold

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trading lower this morning as markets react to the Reserve Bank of Australia’s (RBA) latest policy decision.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7929, down around 0.3% from this morning’s opening rate.

Australian Dollar (AUD) Buoyed by RBA

The Australian Dollar (AUD) enjoyed a modest bounce this morning, with the currency accelerating through the Asian session in the wake of the RBA’s latest policy meeting.

As had been widely expected, the RBA choose to leave its monetary policy on hold this month after two consecutive rate cuts in June and July that have left interest rates at a record low.

However it was the bank’s apparently reluctance to signal further rates cuts that cheered AUD investors, tempering expectations for a third rate cut by the end of the year.

Lending further support to the ‘Aussie’ this morning is also the publication of Australia’s latest trade balance as the country posted its largest trade surplus on record.

According to data published by the Australian Bureau of Statistics (ABS), the domestic trade surplus rocketed up from AU$6.1bn to AU$8bn in June, soaring past expectations of a modest slide to AU$6bn.

However at the same time, limiting upside in the Australian Dollar is the recent re-escalation in US-China trade tensions, which has seen Beijing hit back at the US over the Whitehouse’s accusation that China is manipulating its currency.

Pound (GBP) Steady as Brexit Remains in Focus

Meanwhile, the Pound (GBP) is mostly steady this morning as the UK government sought to curtail some of the pessimism surrounding Brexit talks.

Following comments from EU officials that is currently no room for ‘meaningful discussions’ a spokesperson for Number 10 suggested the UK government is fully invested in striking a deal with the EU.

The spokesperson, said:

‘We will throw ourselves into the negotiations with the greatest energy and the spirit of friendship and we hope the EU will rethink its current refusal to make any changes to the withdrawal agreement.’

However with the UK government still insisting that the Irish backstop must be dropped, it’s not clear how receptive the EU is likely to be.

GBP/AUD Forecast: How Will the UK’s GDP Figures Impact Sterling

Looking ahead, outside of any potential Brexit or trade developments, the main catalyst of movement in the Pound to Australian Dollar (GBP/AUD) exchange rate is likely to be the publication of the UK’s latest GDP figures later this week.

With economists forecasting that economic growth in the UK will have either stagnated or even contracted in the second quarter it’s likely we will see Sterling sentiment sour at the tail end of this week’s session.

Meanwhile the focus for AUD investors is likely to be on the release of the RBA’s statement on monetary policy.

While, the RBA’s recent policy meeting means that the statement will offer few surprises, we may still see the Australian Dollar drift lower if the bank outlines the conditions which may cause the bank to pursue another rate cut.

Matthew Andrews

Contact Matthew Andrews