What Impact will China have on GBP/AUD Exchange Rates? (Matthew Vassallo)

GBP/AUD rates have remained flat during Thursday morning’s trading, despite losses for the Pound across the board. Rates are very similar to where they were trading a month ago but the AUD did make gains during this period as the Pound suffered from a run of poor UK data releases. These gains have now been eliminated due to the on-going economic problems in China, which are showing no signs of improvement.

It is a difficult pair to forecast under current market conditions, as on one hand you are looking at a negative trend for GBP but on the other a handicapped AUD due to the downturn in China. Personally I feel the Pound will struggle to make a move back to the highs of last year under current conditions but it should find support around 2.05.

My overriding feeling is that the problems in China will outweigh those in the UK and I would be tempted to take advantage of the improvement. The AUD has gained over 10 cents in the last few months but these gains could start to disappear quickly if the Pound regains any kind of market support.

Today’s Bank of England (BoE) interest rate decision and subsequent monetary policy statement have helped to ease some pressure on Sterling and I would not gamble on what is now an extremely volatile and unpredictable market.

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