GBP/AUD – Sterling has made gains against the Aussie of late following a statement from chief Brexit negotiator for the EU, Michel Barnier. Barnier said that it is realistic that a Brexit deal could be in place in 6-8 weeks. Following the announcement we have seen GBP/AUD hit 1.83.
There are also concerns from down under which was another catalyst for the Spike. Australia is heavily reliant on China purchasing it’s exports and if there is an impact to the Chinese economy it can have repercussions on Australia. The ongoing trade war between China and the US is an example of this.
China have vowed to match the US Dollar for Dollar on tariffs and both sides are preparing further tariffs. As the war escalates investor confidence in the Australian Dollar is waning. During times of global economic uncertainty investors seek out safe haven investments with solid returns.
The US Dollar is the destination of choice, 10yr bond yields are currently the highest for years and there are also expected to be further rate hikes by the Federal Reserve this year.
There is also the problem of living costs. Many seek to live in high wage growth areas such as Sydney or Melbourne. Housing prices in these area are proving overly expensive and Australians are being forced to spend their hard earned money on necessities rather than luxury goods which is hurting the Aussie.
Although the lack of Brexit progress is holding back the pound I think the Aussie is one of the few major currencies we could see further gains.
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