Daily Archives: July 9, 2018

GBP/AUD – Sterling stands strong depsite Davis resignation (Daniel Johnson)

GBP/AUD – The progress in Brexit negotiations is key to the value of GBP/AUD. The resignation of chief Brexit negotiator David Davis does not bode well for Sterling.

After Theresa May released her intentions for Brexit David Davis announced he thought the deal was “unworkable” and has subsequently resigned. Angela Merkel has also stated the deal is unworkable.

Despite this the Pound remained robust against the Aussie and we did not see any significant falls. This can be attributed to positive UK data, namely Services Purchase Manager Index (PMI) which came in at 55.1, the highest since October 2017. This is significant as Services makes up around 70% of UK GDP.

There is also of course the ongoing trade war with China and the US which is certainly putting off investors moving to the Australian Dollar. Commodity based currencies are not as popular in times of global economic uncertainty. China is the biggest purchaser of Australian goods and services and Chinese growth will be hindered by the trade war. This in turn will hit the Australian economy.

Despite the US initiating these trade wars the US Dollar continues to gain strength as investors seek a safe haven currency with high returns. The Fed has hiked interest rates on two occasions this year ant there is set to be more. Ten year treasury bonds currently have the highest returns in over four years.

GBP/AUD is currently range bound between 1.75-1.80. AUD buyers aim to move when interbank hits 1.79.

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Thank you for reading. Daniel Johnson