The Aussie dollar has weakened overnight, following the release of Chinese Inflation data which has risen to a 15-month high, principally to rising pork prices. This has raised fresh concerns about the global trade wars and highlights the general unease over the stability of the Chinese economy. As a major trading partner of Australia, news affecting the Chinese economy will often weigh on, or help the Aussie dollar.
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I see no signs of the trade wars being resolved and the anticipated and recorded slowdown in the global economy is only putting more pressure on the Aussie dollar and the Australian economy The Japanese G20 Summit this weekend will be a key event ahead for the trade wars, increased concerns over their nature would likely see the AUD weaker. Trump is threatening to raise tariffs up to 25% on $300bn of Chinese imports after this weekend. Meanwhile, the Chinese may retaliate with extra tariffs and even halting the exports of key precious metals, used in automotive and electronic devices by the US.
This weekend’s news at the G20 Summit will be key to shaping sentiment on global trade and the Australian dollar. It is likely that any signs of escalation in the US-China trade concerns, will put further pressure on the RBA (Reserve Bank of Australia) to look at cutting interest rates in the future.
Other news ahead this week is tomorrow’s Australian Unemployment data, a key factor used by the RBA in making any decisions on interest rates. We also have Chinese Retail Sales Friday, which again will help to provide evidence of the trade wars and how they might be affecting global trade. If you have a currency exchange involving the Australian dollar, then making some plans ahead of these releases seems wise.
The pound seems likely to struggle to make any large gains at present, with the movements on sterling being largely linked to investors views on Brexit and what might lie ahead. GBPAUD levels look to continue to operate in the lower 1.80’s on the interbank rate for the time being.
The Aussie dollar may come under some fresh pressures sooner than later, owing to the trade wars. The pound to Australian dollar could be in for a choppy few sessions within the lower 1.80’s on the interbank rate, as the market struggles to debate the value on both. Neither is establishing any clear overly positive or negative trend in the last week, and as the global and domestic issues on both continue, the rangebound pattern may persist.
With plenty to discuss on both currencies, now might be a wise time to review any current or future positions on a GBP/AUD exchange. The next steps on Brexit and the trade wars looks to be the most defining news ahead, neither of which looks any easier to be accurately predicting.
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