Trade War Jitters Continue to Rock AUD/GBP Exchange Rate
The Australian Dollar Pound (AUD/GBP) exchange rate fluctuated wildly on Thursday as currency markets remain wary of trade tensions.
At the time of writing AUD/GBP is holding close this morning’s opening levels, after the pairing showed significant volatility in the middle of the Asian trading session.
Australian Dollar (AUD) Unstable as US Trade Rhetoric Intensifies
After rocketing higher on the back of some upbeat Chinese data overnight on Wednesday the Australian Dollar found itself in freefall again during Thursday’s session as trade concerns rocked currency markets once again.
This comes following Trump’s appointment of Larry Kudlow as his new economic advisor and Kudlow’s subsequent comments in which he stepped up the Rhetoric against China.
In an interview with CBNC Kudlow said;
‘I must say as somebody who doesn’t like tariffs, I think China has earned a tough response not only from the United States…
‘A thought that I have is the United States could lead a coalition of large trading partners and allies against China, or to let China know that they’re breaking the rules left and right.’
This has stoked fears that Trump’s administration is gearing up to announce new tariffs on Chinese imports.
This prompted a sharp drop in market risk appetite, which in turn lead to reduced demand for the Australian Dollar.
Meanwhile the Pound was in turn forced to relinquish some of its gains at the start of the European session on Thursday as Brexit scepticism weighed on sentiment.
Particular concerns have been raised over the UK government’s ability to reach a transitional deal with the, as well as fears that the next stage of talks could be delayed until at least June.
AUD/GBP Forecast: BoE to Signal Upcoming Rate Hike in May?
Looking ahead a lull in economic data in the second half of this week’s session is likely to prompt markets to turn their focus to next week’s data.
This will most likely be dominated by speculation over the Bank of England’s (BoE) latest rate decision, with the the AUD/GBP exchange rate likely to slide if the BoE hints that a rate hike may be on the table for May.
Meanwhile the Reserve Bank of Australia (RBA) will publish the minutes from its March policy meeting early next week, with the Australian Dollar likely to tumble if they show that policy makers remain reluctant to tighten policy this year.