Pound Australian Dollar Exchange Rate Sinks, ‘Aussie’ Rises on US-China Trade Deal Hopes

GBP/AUD Exchange Rate Falls as US-China Trade Deal Could Be Signed ‘Very Shortly’

The Pound Australian Dollar (GBP/AUD) fell by -0.6% today, with the pairing currently trading around AU$1.870 as the risk-sensitive ‘Aussie’ continues to benefit from rising hopes of a US-China trade deal after President Donald Trump announced that a settlement between the world’s two largest economies would be concluded ‘very shortly’.

Meanwhile, Beijing also announced that it would be lowering its tariffs on over 850 imports, a further sign that a trade deal could be on the horizon.

Gary Ng, an Economist at Natixix comments:

‘The move in lowering import tariffs reflects that the government wants to reaffirm its stance to the world on freer trade amid the trade war.

‘Domestically, lowering import tariffs are helpful in reducing business and consumer costs.’

With China being Australia’s largest trading partner, any signs of a trade deal between the Beijing and Washington boosts the AUD/GBP exchange rate.

GBP/AUD Exchange Rate Sinks on Heightened Brexit Uncertainty

The Pound (GBP) fell today as markets continue to react negatively to Prime Minister Boris Johnson’s Withdrawal Agreement Bill, which now includes a clause which could see the UK face a cliff-edge Brexit no-deal in later next year.

This follows Boris Johnson’s outlawing of the ‘implementation period’ beyond a December 2020 deadline.

Dean Turner, UK Economist at UBS Global Wealth Management, was also downbeat about UK market optimism in the year ahead, saying:

‘It’s possible that there will be some bounce in activity given the clarity on Brexit, but any improvement in sentiment is likely to fade as the next Brexit deadline draws closer.’

Additionally, with no UK economic data due out until after Christmas, the GBP/AUD exchange rate has struggled due to markets becoming increasingly jittery ahead of the 31st January Brexit deadline in which the UK is due to leave the European Union.

Pietr Matys, a Currency Strategist at Rabobank, commented:

‘Johnson is so determined to leave the EU and could do that without a trade agreement in place, so this has re-ignited concern about a hard Brexit.’

GBP/AUD Outlook: Brexit and US-China Trade Developments in Spotlight

The GBP/AUD exchange rate will continue to be driven by Brexit developments into the New Year, with any signs of UK-EU relations coming under any further strain proving Pound-negative.

Meanwhile, Australian Dollar investors will continue to focus on US-China trade developments. A Phase One trade deal being secured by Beijing and Washington would boost market appetite for the risk-averse Australian currency.

David Moore

Contact David Moore