Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as Trade Ware Fears Grow

August 1, 2018 – Written by John Cameron

The Pound Australian Dollar (GBP/AUD) exchange rate ticked higher on Wednesday as markets expressed concerns over reports that US is planning to intensify its tariffs against China.

Australian Dollar (AUD) Exchange Rate Slips on Reports the US May Step up Tariff Plans

The Australian Dollar (AUD) fell back during the European session on Wednesday follow reports that the Whitehouse plans to increase pressure on China.

Bloomberg, citing anonymous sources suggests that the US is looking at increasing tariffs rates from 10% to 25% against the $ 200bn worth of Chinese goods being targeted in upcoming tariffs.

This source told Bloomberg:

‘President Donald Trump has threatened an additional $ US200 billion with levies of 10%, a level the administration may raise to 25% in a Federal Register notice in coming days.’

The report unnerved AUD investors, who fear a full-blown trade war between the US and China could have dire consequences for the Australian economy.

Gains in Pound (GBP) Exchange Rate Clipped by Underwhelming Manufacturing PMI

Meanwhile the Pound (GBP) found its advance slightly undermined on Wednesday following the release of the latest UK manufacturing PMI.

According to data published by IHS Markit, the UK’s manufacturing PMI fell from 54.3 to 54 in July, falling to a three-month low and missing expectations of a slightly more modest fall to 54.2.

The slide points to a weak start to the third quarter for the UK’s private sector, with the subdued growth in the manufacturing sector on track for another negligible contribution to UK GDP.

Rob Dobson, Director at IHS Markit, said:

‘UK manufacturing started the third quarter on a softer footing, with rates of expansion in output and new orders losing steam.

‘The upturn in the sector has eased noticeably since the back-end of 2017, meaning that manufacturing has failed to provide any meaningful boost to headline GDP growth through the year-so-far.’

GBP/AUD Exchange Rate Forecast: All Eyes on BoE as Markets Brace for Rate Hike

Looking ahead, an expected rate hike from the Bank of England (BoE) is expected to dominate movement in the Pound Australian Dollar (GBP/AUD) exchange rate tomorrow.

However while GBP investors are likely to welcome the BoE’s move to raise interest rates –only the second hike in a decade- analysts are still forecasting that the Pound may fall following the decision.

This is due to economists expecting a ‘dovish hike’ from the bank, with the rise unlikely to be the start of a new tightening cycle.

In the meantime the Australian Dollar could tick higher overnight on Wednesday should the domestic trade balance figures show that the Australia trade surplus swelled in June.

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TAGS: Pound Australian Dollar Forecasts