The Chinese economy from July to September recorded a 6.5% decrease from this time last year as the trade war between China and the US starts to feed through into economic output from the world’s two largest economies.

Currency Pair% Change in 1 dayDifference on £200,000
GBPAUD0.78%AUD $2860

A Chinese slowdown will ultimately hurt the AUD in the coming months, as a slowdown in output from Chinese factory growth will result in weaker demand in Iron Ore, Australia’s largest export and could hurt investor confidence in the AUD. Other official data for factory orders missed expectations on Friday.

Domestically, the GBP and AUD share a quiet week in terms of economic data that could impact each currency. The only noticeable information out down under was the Commonwealth Bank’s business sales report which saw spending levels across the Australian economy at its slowest pace in over a year in September, with business spending falling well short of expectations.

AUD feels the knock on impact of China's economic uncertanty

Political tensions from both sides of the currency pair weigh on their value

Despite the Liberal Party losing its parliamentary majority over the weekend, it was in fact GBP that gave up more ground over the course of yesterday’s trading, due to the situation in the UK surrounding Brexit. GBP/AUD fell 0.5% yesterday at the day high compared to the day low as investor sentiment turns negative for pound.

Whilst I imagine Brexit to be the main driver on the pair’s value for the short term, the political and economic situation down under is not one that looks like it is improving anytime soon.

An early general election in Australia is now a distinct possibility after Saturday’s defeat, as the ruling coalition will now face long and lengthy negotiations to pass any legislation. I would imagine that as the early general election draws closer, I would expect the AUD to suffer. 

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