GBP/AUD Tumbles back below $1.82 on Renewed US-China Trade Optimism

GBP/AUD Exchange Rate Slides on Improved Risk Appetite

The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is on the retreat this morning as renewed hopes for US-China trade prompted markets to go risk-on.

At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8144, down almost 0.6% from this morning’s opening rate.

Australian Dollar (AUD) Soars on US-China Trade Deal Hopes

The Australian Dollar (AUD) is one of the strongest performers this morning, amidst renewed hopes of some positive progress in US-China trade talks with this week.

A Chinese delegation led by Vice Premier Liu He is currently on route to Washington for high-level talks which are to get underway on Thursday.

The risk-sensitive ‘Aussie’ initially faced some pressure this week as reports suggested China would refuse to budge on a number of key issues, perhaps seeking to exploit Trump’s recent domestic headaches.

It appears that the US administration may not have got the message however, as White House Economic Adviser Larry Kudlow said it was possible we could see progress this week.

Trump took it one step further, proclaiming ‘we think there’s a chance we could do something very substantial’.

While a comprehensive agreement appears unlikely, should an interim deal be found that prevents a further escalation in tensions then we could see the Australian Dollar extend its recovery.

Pound (GBP) Stumbles as Downing Street Prepares for Breakdown in Brexit Talks

The Pound (GBP) meanwhile, is on the retreat this morning as the BBC reports that Downing Street is preparing for the breakdown of Brexit talks.

Boris Johnson submitted his ‘final’ Brexit offer to the EU last week. However the proposals were quickly shot down by EU leaders as unworkable.

Since then the EU has refused to budge even ‘one centimetre’ according to a government official who spoke to the BBC, and leaked texts from within Downing Street suggest that if the deal ‘dies in the next few days, then it won’t be revived’.

Most worrying however is that leaked message suggests that the government may be attempting to scupper another Brexit deal, by signalling it would disrupt EU proceedings if it remains in past 31 October.

GBP/AUD Forecast: Stalling UK GDP to Put More Pressure on Sterling?

The Pound to Australian Dollar (GBP/AUD) exchange rate could face some additional headwinds this week with the publication of the UK monthly GDP print.

Released on Thursday, the UK’s GDP figures are forecast to show economic growth stagnated in August, potentially renewing fears the UK is at risk of slipping into a recession in the third quarter.

In the meantime, a potential slide in Australia’s consumer confidence could cap some of the upside in the ‘Aussie’ overnight on Wednesday.

However the focus for AUD investors is likely to be on Friday’s Financial Stability Review from the Reserve Bank of Australia (RBA). Could a downbeat assessment of the current economic situation send the ‘Aussie’ lower?

Matthew Andrews

Contact Matthew Andrews