The Australian dollar is now set for a volatile period after US trade tariffs on Chinese goods kicked in this morning as planned. The Australian dollar as a commodity currency is likely to be sensitive to any further escalations in these trade wars and the dollar could come under considerable pressure. $34 billion worth of tariffs have been imposed as of today and China has already reciprocated. US President Donald Trump has signalled his intent to increase these tariffs to as much as a staggering $450 billion on Chinese products if China retaliated.
It will now be interesting to see the response from the US after this retaliation and where this heads next. The EU has also been embroiled into these trade disputes highlighting how big an issue this all is. If global economic growth falls in the future then the Australian dollar is likely to be one of the hardest hit.
Today marks a hugely important today for those clients looking to buy or sell Australian dollars with pounds. British Prime Minister Theresa’s May will be holding a cabinet meeting at Chequers to finalise the detail on Brexit and how close Britain will be aligned to the EU. There has been much disagreement within her cabinet and today should give guidance as to whether Britain will pursue a soft or a hard Brexit. The pound is likely to react accordingly and this meeting does have the potential to cause some fireworks.
No details have yet been released but the outcome of today’s meeting will form the basis for a white paper on Brexit. A softer Brexit that maintains trade and one that is likely to be agreed by the EU is likely to see the pound rally. However any resignations or objections from within government could create even more uncertainty for sterling exchange rates. Clients would be wise to plan around this event as we could finally be at the tipping point.
For more information on the Australian dollar and for assistance in making transfers at the opportune time then please get in touch with me James at [email protected]