The Australian dollar has weakened again after coming under pressure from the recent trade tariffs being imposed by China and the US. The Australian dollar as a commodity currency is impacted negatively when there is a threat to global growth and that risk is very real in the current climate. With tit for tat trade tariffs being imposed by both nations there have been concerns that things could escalate and end up in a global trade war.
Chinese President Xi Jinping made a conciliatory speech this morning and even suggested opening trade which would include a reduction on import tariffs on vehicles and even hinted at encouraging imports. It follows a tweet from Trump yesterday which highlighted that China has been slapping on tariffs to the tune of 25% whilst in the US that tariff has only been 2.5%
I don’t think anyone is expecting a fully blown trade war but there is still some nervousness about the trade disputes which also moves into the realms of the NAFTA trade agreement between the US, Canada and Mexico. The Canadian dollar is another commodity currency also feeling the pinch and how Trump handles these negotiations will almost certainly have a knock on effect on the Aussie.
Those clients looking to buy Australian dollars with pounds could see some more positive movement as the trade disputes intensify but at some point an outcome should be reached and this should be beneficial for the Aussie. Rates for GBP AUD are hovering around 1.83 and are proving to be some of the best levels we have seen for some time. A rally in commodity prices on brighter global outlook could see material gains for the Aussie and reverse the good gains that have been witnessed.
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