The Australian dollar has made a small recovery, although there are still concerns over coal trade between China and Australia. Last week saw China put a ban on coal imports from Australia causing an upset in the markets over fears of a slowdown in China and putting pressure on the Australian dollar. Coal is one of Australia’s biggest exports to China so any uncertainty on trade can have a negative impact on the Aussie. It has been reported that five harbours in China will no longer permit coal to be cleared.
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Australian Prime Minister Scott Morrison has however intervened stating that the move from China doesn’t point to a souring of trade ties, whilst China have also denied deliberately targeting Australian coal imports stating the reports are false. The statements appear to have alleviated concerns for the moment although it is still not entirely clear whether Australian coal has been banned or whether it is simply taking a much longer time to clear through Chinses customs. The other theory is that it is a political warning shot to Australia at a time when Australia has banned Chinese firm Huawei from its 5G network on security concerns. Expect more volatility for the Australian dollar as the story unfolds.
The Australian dollar is heavily impacted by developments in the US, especially when it comes to the trade war between the US and China. As a result the Australian dollar has been given a boost after US President Donald Trump indicated his intention to delay putting further tariffs on Chinese exports destined for the US.
The statement from Trump also appears to be backed up by China where the meetings have been described as showing “great progress”. All these positive soundbites could work in the Australian dollar's favour with more gains to be expected if a deal is reached.
GBPAUD chould see a very interesting day with a statement from UK Prime Minister Theresa May which should offer guidance as to the next stages of Brexit.
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