What Impact will China Have on AUD Exchange Rates? (Matthew Vassallo)

AUD to GBP Rate Pauses at the 2020 Highs

GBP/AUD rates have proved particularly volatile over the past few months, with opportunities being presented for both buyers and sellers.

The general trend during 2015 was Sterling positive but the AUD found some much needed support during the last quarter and is now trading almost 15 cents higher than it was during last summer. Whilst I do not expect this trend to continue below 2 on the exchange, conditions for AUD sellers have certainly improved.

Looking ahead and I am concerned that the on-going difficulties facing the Chinese economy will have a further knock on effect, and the AUD could well struggle over the coming weeks as a result. Despite the Reserve Bank of Australia (RBA) deciding not to cut interest rates further during their last policy meeting, we could see them take action if the Australian economy stagnates further.  This would almost certainly devalue the AUD and unless the problems in China show some signs of recovery soon, the Pound will benefit not due to any overriding confidence in Sterling but because of the complete lack of confidence in Australia and the AUD.

Looking ahead over the next couple of days and we have the latest trade balance figures released overnight in Australia. These are particularly poignant at present due to a the concern over trade arms with China and the Australian economy’s heavy reliance on the export of its raw materials. If this sector of the economy falters then the AUD will struggle to make any further impact against the Pound and is likely to lose value.

Therefore I would be very tempted to consider my position if I had any AUD positions to sell over the coming months, as the recent improvement may soon dissipate.

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