GBP/USD: Easing Trade War Fears Support Pound Dollar Rate

The Australian dollar US dollar exchange rate traded lower through the Asian session on Wednesday. The pair is currently down 0.2% at the time of writing. However, it remains above the important US$0.68 handle.

US – China trade concerns are weighing on the Chinese proxy, the Aussie dollar. The latest developments show that the two sides are still some distance from a phase one trade deal. Whilst President Trump insisted that a deal was “moving along” he was also quick to point out that a deal had to be one that he liked. If not, he would apply more trade tariffs to China.

The threat of more tariffs combined with the US Senate passing a bill supporting the pro-Democracy protesters in Hong Kong will aggravate an already very fragile China – US relationship. These moves will no doubt fuel tensions between the world’s two largest economies and are weighing on the China proxy, the Australian dollar.

A dovish stance by the Reserve Bank of Australia as shown by the minutes from its most recent meeting are also hitting demand for the Aussie dollar. The RBA did not take the decision to put the current rate cutting cycle on hold lightly. The minutes showed that the RBS saw a case for further easing. This could keep the Australia dollar under pressure as investors look ahead to December’s monetary policy meeting.

No Fireworks Expected From Fed Minutes

Whilst US – China trade uncertainty weighed on the Australian dollar; it boosted the US dollar thanks to the greenback’s safe haven properties.

Us dollar investors will now look ahead to the release of the minutes from the 30th October Federal Reserve monetary policy meeting. In this meeting the Fed cut interest rates for the third time this year. They also signalled that Fed would press pause on the cutting cycle and await further data. Whilst no new information regarding policy is expected, investors will be interested in the deliberations that led the Fed to these decisions.

The minutes come after Federal Reserve Chair Jerome Powell’s testimonies before Congress last week. Therefore, the minutes could be considered out of date. For this reason, they are not expected to cause big swings in the dollar.

 

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 USD = 0.6784 AUD

Here, $1 is equivalent to approximately A$0.67. This specifically measures the US dollar’s worth against the Australian dollar. If the Aussie dollar amount increases in this pairing, it’s positive for the US dollar.

Or, if you were looking at it the other way around:

1 AUD = 1.4739 USD

In this example, A$1 is equivalent to approximately $1.47. This measures the Australian dollar’s worth versus the US Dollar. If the US dollar number gets larger, it’s good news for the Aussie dollar.

 


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