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GBP/AUD Exchange Rate Benefits from Cooling Tensions in US-China Trade Spat

Last week’s high: AU$1.7756

Last week’s low: AU$1.7401

Australian Dollar Rallies as US-China Tensions Perceived to be Cooling

House prices remain an issue for the Australian Dollar, as capital city home prices are on track to fall by 0.9% in November, the largest decline since November 2008.

With the ongoing US-China trade spat, the suggestion of a rapprochement between the pair bolstered the Australian Dollar as investors removed funds from safe haven currency and began backing AUD.

The latest signals of a warming between the two economic powers came last week with comments made by the White House economic advisor Larry Kudlow stating: ‘There is a good possibility that a deal can be made, and that he [President Trump] is open to that.’

Confidence in the Pound dwindled mid-week when the Bank of England (BoE) suggested that with the worst case scenario in terms of a no-deal Brexit, the UK economy would shrink 8% in the immediate aftermath.

This allowed AUD to rally against the Pound, pushing it to its lowest levels in the past month.

AUD Outlook: Easing US-China Trade Tensions Likely to Bolster Australian Dollar

The short term outlook for the Australian Dollar depends primarily on the outcome between the US and China at the G20 Summit over the weekend, with any cooling in tensions potentially likely to bolster the ‘Aussie’.

With the release of the Reserve Bank of Australia’s (RBA) latest interest rate decision this week, the AUD will likely remain steady assuming there is no adjustment to rates, although any unexpected changes are likely to cause movement for AUD.

Australia’s gross domestic product is also set to be released this week, with a forecast suggesting GDP is going to increase at a rate of 2.8% compared to last year. If this figure is lower it is likely that the GBP/AUD exchange rate will push back.

 

Key Events

3rd December

00:30 Australian Building Permits (October)

9:30 GBP Markit Manufacturing PMI (November)

4th December

3:30 RBA Rate Statement (December)

3:30 RBA Interest Rate Decision

5th December

00:30 AUD GDP (Q3)

6th December

00:30 AUD Retail Sales (October)

 

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To keep up to date with the Australian Dollar, visit the AUD blog in our Currency News section.

 

Alastair Archbold

Currency Trader

aja@fcgworld.co.uk

 

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