The AUD weakness is reflected well in the GBP/AUD pair, as Sterling is trading towards the bottom end of its annual trend against the Euro and the US Dollar whereas this is not the case for GBP/AUD.

Currency Pair		% Change in 1 month	Difference on £200,000
GBP	AUD	4.03%	$14,508 AUD

Trade wars a potential negative trigger but US Consumer Confidence remains high

This demonstrates that the Aussie Dollar is struggling at the moment, and if the data released from China this week is a prelude to a disappointing year for Chinese data I think we can expect to see the Aussie dollar drop throughout the year.

With Australia’s economy being closely tied to China’s, as China is its main trading partner I think that a continuation of the slowdown we’ve seen from the world’s 2^nd largest economy will have a detrimental effect on AUD’s value.

Another issue putting pressure on AUD’s value is the reluctance of the RBA (Reserve Bank of Australia) to hike interest rates down under. There are concerns that a hike would hit the property market dramatically, and this has resulted in the deviation between the US base rate and Australia’s being it’s highest in the AUD’s history.

With the US Federal Reserve Bank planning on making 2 further hikes this year, the gap could continue to widen which would likely result in further loses for the Aussie Dollar.

Will GBP/AUD consolidate north of 1.80?

The GBP/AUD pair spent much of yesterday afternoon hovering around the 1.80 mark. It’s likely that this level could remain a resistance point for the Pound, but if the pair manage to consolidate north of this benchmark I think a move back up into the mid-1.80’s is a possibility.

The trade war talks and China’s concerning data releases are likely to remain the main influencers for AUD exchange rates, but there will be Australian Inflation data released in the early hours of Friday.

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News

The key reason for Sterling’s current vulnerability however is Brexit. If there is one thing investors do not react well to it is uncertainty and at present it is extremely difficult to call whether or not a deal is going to come to fruition.

22nd December 2020

Sterling Remains Fragile With a Brexit Deal Hanging in the Balance

Sterling is in an extremely fragile position following Boris Johnson’s announcement on Saturday that many areas of the UK would be placed into Tier 4 lock down.

By Daniel Johnson