Pound Australian Dollar Exchange Rate: Ongoing US-China Trade Tensions Curtails Risk Appetite

GBP/AUD Exchange Rate Muted as Trade Concerns Remain

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate trades in a narrow range this morning, in response to ongoing US-China trade uncertainty.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.7905, virtually unchanged from this morning’s opening rate.

Trade Tensions Continue to Weigh on the Australian Dollar (AUD)

Trade in the Australian Dollar (AUD) is mixed as this week’s session gets underway, with markets opening to fresh US-China trade tensions.

Stoking these tensions were comments made by US President Donald Trump over the weekend, in which he warned China of negative consequences in trade negotiations if Beijing uses force to crackdown on the protests in Hong Kong.

Trump told reporters in New Jersey:

‘I think it’d be very hard to deal if they do violence, I mean, if it’s another Tiananmen Square. I think it’s a very hard thing to do if there’s violence.’

The comments further dim the prospect of any meaningful progress being made in the next round of trade talks in September, an outcome which is viewed as AUD negative.

However, simultaneously buoying the ‘Aussie’ were Trump’s comments on the US economy as he claimed fears of a US recession were overblown, lifting some of gloom which had descended over markets last week.

Echoing his President, Trump’s trade advisor, Peter Navarro said:

‘What I can tell you with certainty is that we’re going to have a strong economy through 2020 and beyond with a bull market . . . the Fed will be lowering rates.’

Pound (GBP) Subdued in Wake of Leaked Brexit Report

Meanwhile, the Pound (GBP) is rangebound this morning as markets digest a leaked government report, outline some of the consequences of a no-deal Brexit.

The report suggests the UK faces shortages of food, medicine and fuel as well as major disruption at ports if the UK crashes out of the EU without a deal.

While the government stated the report was its ‘worst-case scenario’ and did not accurately reflect the current state of preparations, which had accelerated under Boris Johnson, it still stoked market anxiety.

GBP/AUD Forecast: How Will the RBA Minutes Impact the ‘Aussie’?

Coming in the first half of this week, we could see the Pound to Australian Dollar (GBP/AUD) exchange rate trend higher as the Reserve Bank of Australia (RBA) publishes the minutes from its latest policy meeting.

While the RBA left rates on hold this month and appeared to hold little appetite for further cuts, speculation of a third rate cut this year continues to swirl.

With this in mind investors will be look to the minutes for fresh insight into monetary policy, potentially weakening the ‘Aussie’ if policymakers appear receptive to further cuts.

The absence of any notable economic data, is likely to leave Brexit squarely in focus for GBP investors this week.

This could see the Pound extend its recent losses if parliamentary support for a vote of no-confidence in Boris Johnson continues to grow.

Matthew Andrews

Contact Matthew Andrews