The pound made some positive gains versus the Australian dollar over the last couple of trading sessions. The AUD is suffering over the prospect that a trade deal between China and the US not be coming as soon as many hoped. As China is Australia’s largest trading partner, any problems in world’s second largest economy will often have a negative effect on the value of the Australian dollar.
China has promised to try and cut some of its tariffs in order to try and open its economy after being accused that many of its trade practices are unfair. In a recent statement held in Shanghai, Chinese President Xi Jinping spoke about global free trade and claimed that the current system in being affected, with his comments likely to be directed at the Trade Wars between China and the US.
Xi has pledged a reduction in tariffs and to allow easier trade for firms overseas looking to trade in China. With Trump having put tariffs on approximately 50% of Chinese imports coming into the US in an attempt to encourage American consumers to buy domestic goods.
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The Reserve Bank of Australia (RBA) have once again kept interest rates on hold and it appears as if this will be the same for quite some time. Property prices in both Sydney and Melbourne have been struggling recently and with the problems in China the central bank do not appear to have too much appetite for an interest rate hike in the near future. In the last few years the Australian dollar has remained very strong owing to its attractive interest rate yield. However, in more recent times as the US has now surpassed that available in Australia, and is likely to do so by an even larger disparity later this year, we could see further Australian dollar weakness ahead unless the RBA look to change its tone.
If you’re looking to sell Australian dollars before the end of this year it may be worth getting things organised in the near future.
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