GBP/AUD Exchange Rate Climbs as US-China Trade Tensions Flare
The Pound Australian Dollar (GBP/AUD) exchange rate is trading higher at the start of this week’s session as renewed trade uncertainty heaps on pressures against the ‘Aussie’.
At the time of writing the GBP/AUD exchange rate is currently up around 0.3% this morning, extending the near 1% gains seen on Monday.
Australian Dollar (AUD) Exchange Rates Weakened by US-China Trade Concerns
The Australian Dollar (AUD) continues to trend lower against the Pound (GBP) and many of its other peers this morning as the ‘Aussie’ continues to be pressured by ongoing trade uncertainty between the US and China.
The latest jitters have been triggered by China’s decision to call off upcoming trade talks with the US as Washington implemented its latest round of tariffs against China.
While Beijing responded with its own round of tariffs, it was greatly dwarfed by the US tariffs against $200bn worth of Chinese goods.
This has led to Beijing accusing Washington of ‘trade bullying’ and suggestions that the US is holding ‘a knife to China’s neck’ over the issue.
Beijing says the Trump administration is trying to "impose its own interests on China through extreme pressure" https://t.co/0vFdg5zILB
— The Wall Street Journal (@WSJ) September 25, 2018
Chinese vice-commerce minister, Wang Shouwen stated that the resumption of trade talks depends on the ‘will’ of the US, with some observers going so far to suggest the current standoff could continue until Trump leaves the White House.
Analysts at Mizhuho Bank said:
‘Given these developments, it is increasingly likely that both sides will not resume negotiations for some time, at least until there is a noticeable shift in the political mood on either side.’
With Australia’s economy heavy reliant on trade, particularly with China, fears that the country could get embroiled in a trade war with the US have resulted in considerable weakness in the Australian Dollar in recent months.
GBP/AUD Exchange Rate Forecast: Fed Rate Decision to Impact the Aussie?
Looking ahead, Wednesday’s rate decision by the Federal Reserve is likely to be the main catalyst for movement in the Pound Australian Dollar (GBP/AUD) exchange rate in the immediate future.
Movement in the US Dollar (USD) can often have a major impact on trade sensitive currencies like the ‘Aussie’ due to its impact on USD priced commodities like major Australian export, iron ore as well as by limiting demand for riskier assets.
This will likely result in Australian Dollar seeing some movement on the back of the Fed’s rate decision tomorrow, with the currency likely to stumble should the US Dollar be bolstered by a hawkish outlook from the bank.
In the meantime the Pound may stumble on Wednesday morning as the Confederation of British Industry’s (CBI) distributive trades index is expected to report UK retail activity slowed in September.
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