Daily Archives: May 22, 2018

US-China Trade War Truce bodes well for the Aussie (Daniel Johnson)

Halt on tariffs benefits the Aussie

There has been an ongoing trade war between the Chinese and the US following Trump’s appointment as President. He has a thinly veiled issue with the Chinese and is highly agitated at the amount of debt the US is in to the Chinese. His mantra is “make America great again” and he took fire at the Chinese by threatening to impose tariffs that were simply unrealistic, that would be detrimental to both sides.

These tariffs would impact Chinese growth and in turn hit the Australian economy. Australia is heavily reliant on China for the purchase of it’s raw materials, particularly iron ore. If the Chinese economy suffers due to Trump’s tariff s the knock on effect will impact the Australian Dollar.

The US and the Chinese have recently agreed to put a halt to the trade war under the premise that China will purchase USD 200bn worth of US goods and services. Following this announcement the Aussie strengthened significantly. In particular against Sterling, this news along with poor economic data and a very  poor interest rate forecast from the Bank of England (BOE) has caused the pound to lose nearly 10 cents against the Australian Dollar. It was only recent we saw GBP/AUD at 1.84, we were in the 1.76s during today’s trading.

When to move?

AUD Sellers- Take advantage of current levels, 1.80 is an incredible selling price, let alone 1.76. Keep in mind GBP/AUD was 2.20 pre Brexit and the Pound is chronically undervalued.

AUD Buyers – If you have to move short term I’m afraid 1.79 should be your new target, the 1.80 resistance point has now been broken.

If you have a currency requirement I will be happy to assist. It is crucial to be in touch with an experienced broker if you wish to maximise your return. If you let me know the details of your trade I will endeavour to produce a free, no obligation trading strategy for you. If you have a trade to perform I will also happily provide a free quote and I am confident our rates are among the best in the industry. I would be willing to demonstrate this in form of a comparison with any competitor. You can trade in safety knowing you are dealing with company FCA registered and one that has been trading for 16yrs. Foreign Currency Direct PLC.

If you would like my assistance I can be contacted at dcj@currencies.co.uk. Thank you for reading. Daniel Johnson

 

Will the Pound increase towards the end of the week vs the Australian Dollar?

The Australian Dollar has improved vs the Pound during the last few days as political tensions between the US and China appear to be easing recently.

Previously, it was suggested that Australia could be caught in the middle of the trade wars between the world’s two largest economies and as Australia is heavily reliant on what happens with the Chinese economy this can often have a big impact on the value of the Aussie Dollar.

Longer term I still think the Australian Dollar will weaken once again as the economy is still rather fragile down under. Inflation is still below the required figure and the Reserve Bank of Australia have suggested on a number of occasions that they will be keeping interest rates on hold for the foreseeable future.

Meanwhile I fully expect the US to continue on its path of increasing interest rates during the course of 2018 and whilst growth continues to rise in the US I think this will cause global investors to sell off the Australian Dollar in favour of the US Dollar which will provide strong growth and a very positive yield.

This would typically cause the AUD to weaken against a number of different currencies including vs the Pound so I would expect the Pound to make gains in the medium to longer term vs the Australian Dollar.

In the short term the focus will likely turn to what is happening with UK economic data as data in Australia is rather thin on the ground this week.

Tomorrow morning UK inflation is due to be published and this has been a big factor in how the Bank of England has reacted recently as if inflation continues to remain high the general theory is that a central bank increases interest rates to combat high inflation and this would typically strengthen the currency involved.

On Thursday UK Retail Sales are announced and with the previous release having been affected by the ‘beast of the east’ I think we could see the data come out rather positively which could see GBPAUD rates recover towards the end of this week.

If you would like further information about what is happening with the Pound vs the Australian Dollar or if you’d like a free quote to buy or sell Australian Dollars then contact me directly and I look forward to hearing from you.

Tom Holian teh@currencies.co.uk