Australian Dollar Weakness as US China Trade War Escalates (James Lovick)

The pound to Australian dollar exchange rate has rallied higher following the latest developments over the US China trade war. Rates for GBP to AUD are now sitting just below 1.87 presenting a good opportunity for buying Australian dollars. The Australian dollar has come under pressure after US President Donald Trump has delivered on his promise to impose tariffs of 25% on $200 billion of Chinese exports.

The Australian dollar is sensitive to the US / China trade war as Australia have a heavy reliance on China for trade. If the trade war continues or escalates further then the Australian dollar could see further weakness. China has already retaliated having made the decision to hike tariffs on up to $60 billion worth of American goods. The fear is that Donald Trump could impose tariffs on all Chinese goods which could bode badly for the Australian dollar.

Brexit meanwhile remains a major driver for GBP vs AUD and the European elections to held 23rd May could see much volatility for the currency pair. British voters are expected to punish the two main parties in a way that has never been seen before. A huge shift to the Brexit party could help change the direction of Brexit. A cleaner break between Britain and the EU could start to look more likely although this would likely be seen as negative for the pound as the uncertainty attributed with a no deal Brexit would return. If however there is a shift to Remain supporting parties then the opposite is true and the pound could rally although this seems less likely looking at the current polls. Those looking to buy or sell Australian dollars would be wise to plan around these EU elections as they represents a major event and could result in high volatility.

Australians are also set for their general election to be held at the end of this week which could see further volatility for the Australian dollar. New rules however will insist that the next Prime Minister will serve a full term after so many changes in the top job in recent Australian history. Elections can always result in market volatility but if anything having the confidence for a longer term bringing some stability and continuity in governance could be seen as positive for the dollar.

For more information on the Australian dollar and for assistance in making transfers then please contact me James at jll@currencies.co.uk

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