Both the Australian dollar and British pound sterling have had a hard time of late caught between the rock of the China/US trade war and the Brexit hard place.
The Australian dollar dropped 3.6% in the last month after further tensions in the US/China trade war when china was branded a “Currency manipulator” by the US for the first time in 25 years.
China, according to the Americans, was devaluing its currency to gain an unfair edge in retaliation for President Donald Trump’s surprise announcement four days earlier that he would impose new tariffs of 10% on around $300bn of Chinese imports.
After the PBOC allowed the USD/CNY rate drop below 7.0 America’s sharemarket suffered its worst day this year, emerging-market currencies including the Brazilian real, Indian rupee and South African rand, all fell. The Reserve Bank of New Zealand cut its benchmark interest rate by twice as much as expected and the Australian dollar fell to its lowest level in a decade.
Australia has a difficult position between the U.S. and China. The U.S. is Australia’s largest direct investor while China is Australia’s largest trading partner.
Over the same period the GBP/USD rate also dropped 3.8% due to the odds of a hard Brexit increasing with Boris Johnson taking up residence at Number 10 and the British economy looking like sinking into recesssion.
However for readers interested in the latest AUD-GBP forecasts the AUD/GBP or GBP/AUD exchange rates this has meant that the cross-rate been volatile and trading range-bound (side-ways) stuck between these two opposing forces.
“If it wasn’t for Brexit the Pound would probably be above AUD $2 value due to the weakness of the Aussie against the vast majority of the majors” says Ian Cragg from SendFX, “We are currently seeing US Expats living in Australia making the most of the 10 year USD to AUD high by bringing across savings to take advantage of the greenback strength”.
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