The pound has remained resilient against the Australian dollar and has stayed above what was a key resistance point 1.80.
I think this can be attributed to chances of a No-deal scenario remaining low as the House of Commons and indeed Brussels are trying to avoid a no deal at all costs.
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I think the pound could remain fragile however until we have firm progress in Brexit negotiations. Considering the latest extension this may be some way off.
The Australian economy does have it’s own problems. Housing prices remain inflated in high wage growth areas and Australians are being forced to spend their money on necessities as opposed to luxury goods and services.
Australia’s heavy reliance on China purchasing its exports is also a concern. The US-China trade war is causing a slowdown in Chinese growth and this has a knock on effect on the Australian economy and in turn the Australian dollar.
Iron ore is Australia’s primary export to China and as such its price can influence the value of the Australian dollar.
Recent news emerging from China-US talks indicate that an end could be in sight. US Treasury Secretary Steven Mnuchin has indicated that we could see a conclusion to the trade war in as little as four weeks. If a deal is agreed this could be good news for the global economy and particularly Australia as investor concerns ease in the region.
There is very little data of consequence coming out of Australia today. The next release of importance will be Thursday next week when we will see unemployment figures. The Australian economy has been struggling of late which could be attributed to global economic uncertainty and unemployment is set to rise from 4.9% to 5%. If the increase is higher than the consensus, we could see an opportunity in the market.
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