The Australian dollar is one of the few currencies where I feel the pound has potential to make gains. The US-China trade war is having ramifications on the Australian dollar. Australia is heavily reliant on China purchasing its goods and services. The current trade war between the US and China is hurting China’s growth, and due to Australia’s heavy reliance on China it is affecting the Australian economy and in turn the Australian dollar.

Currency Pair% Change on 18/10/18Difference on £200,000
GBP7.97AUD0.52%AUD $1,720

Due to current global economic uncertainty investors are seeking safe haven investments and moving away from risky commodity-based currencies such as the Australian dollar. It is in fact the US dollar that is proving to be the destination of choice as it is considered to be a safe haven and also offers impressive returns. The Reserve Bank of Australia currently has Interest rate levels set at 1.5% compared to the Federal Reserve at 2.25% with further rate hikes expected.

If it were not for the current situation with Brexit I feel the pound would have the potential to make significant advances against the Australian dollar.

Housing market remains a concern for Australia

If you have a trade involving the Australian dollar it is important to keep an eye on Chinese data releases, considering China’s significant impact on the Australian economy. Due to the lack of data being released from Australia in the coming days, let us look at recent Chinese data in detail. Overnight we have seen several data releases and the results are varied. GDP year on year saw a decline by 0.2% to 6.5%.

Industrial production also showed a fall from 6.1% to 5.8%, both of these releases came in below expectations. There was a slight increase in retail sales however, up to 9.2% from 9%.

With the trade war between China and the US set to be ongoing I think we could see a greater impact on the Chinese economy and the knock-on effect will hurt the Australian dollar.

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