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GBP/AUD Exchange Rate Volatile on Brexit and US-China Trade Tensions

Last week’s high: AU$1.7799

Last week’s low: AU$1.7525­­

US-China Trade Tensions Sparks Volatility in Australian Dollar

Last week, news of the so-called thaw between the US and China in terms of trade relations – which helped the AUD exchange rates – has reversed and is fully reignited.

The prospect of the US and China becoming embroiled in a trade war is becoming increasingly likely as the US is expected to implement a blanket 25% tariff on Chinese goods.

Later in the week there was a resurgence of risk appetite which saw the ‘Aussie’ buoyed by rebounds in stock markets doubled with some dovish sentiment from the US Federal Reserve.

Tuesday saw the Governor of the Reserve Bank of Australia (RBA) Philip Lowe present his speech, focusing strongly on the idea of trust.

The speech finished off with the statement that the ‘Board does not see a strong case for a near term change in interest rates’ and concluded that the overall picture of the Australian economy was ‘quite a positive picture’.

Added to this, the news of a draft post-Brexit relations agreement between the UK and the European Union buoyed the Pound and allowed it to push back against AUD.

AUD Outlook: Thawing Trade Tensions Breakthrough at G20 Likely to Benefit the Australian Dollar

The main focus over this week will be whether trade tensions heighten at the G20 Summit.

Chinese officials have said that any success at the meeting would have to be on a basis of mutual respect.

Depending on the tone of the speeches over Sunday night and Monday morning, the ‘Aussie’ could potentially push back against the GBP if the tone is hawkish.

Traders will also be listening to the Bank of England (BoE) Governor Mark Carney’s speech, with the UK currency poised to push back against the ‘Aussie’ on any sign of hawkishness.

There could be good news for AUD on Thursday, as the private capital expenditure for the third quarter is set to be released, and if the forecast is correct, there is set to be an increase of 2% from a previous -2.5% which could potentially bolster the ‘Aussie’.

 

Key events

25th November

22:15 AUD RBA Lowe Speech in Sydney

26th November

18:30 GBP BoE Carney Speech

20:30 CFTC AUD NC net positions

28th November

00:30 Construction work done (Q3)

29th November

HIA New Home Sales (MoM) (October)

00:30 AUD Private Capital Expenditure (Q3)

30th November

00:30 AUD Private Sector Credit for October (YoY and MoM)

1:00 CNY non-manufacturing and NBS manufacturing PMIs (Nov)

20:30 CFTC AUD NC net positions

 

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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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