GBP/AUD: Aussie Looks Stronger Amid US-China Trade Hopes

GBP/AUD turned red on November 1 and has maintained this mood since then. The pair is fluctuating at 1.8687 in early trading on Monday, down 0.29% as of 05.21 AM UTC.

The price continues to move within a bearish channel since mid-October. Last Friday, it had the chance to break the channel’s resistance line and attempt a steeper uptrend, but it failed to do so.

The potential for an upward move that would favour the British pound crumbled when US President Donald Trump announced some progress in trade negotiations with China. The news increased global demand for riskier trading, which boded well for AUD.

Besides, China is Australia’s biggest trade partner, so any positive news related to the Chinese economy indirectly supports the Aussie. This is why AUD also got a boost from China’s manufacturing purchasing managers’ index (PMI) published by Caixin on Thursday. Last month, China’s factory activity rose to 51.7 compared to 51.4 in September, while economists expected a contraction to 51.0.

US, China Hint to Positive Negotiations

Representatives of both the US and China said last week that the two biggest economies in the world reached some consensus on their trade relationship. The two countries have been in a trade war since the beginning of last year.

Trump said last Friday that a “phase one” agreement is very close and that he hoped China President Xi Jinping would come to sign it on the US territory, naming the state Iowa among favourite locations. The US President stated:

“We’re looking at a different couple of locations. It could even be in Iowa. We’re discussing locations, but I like to get deals done first.”

The news about a potential trade agreement between the US and China boosted the stock markets and increased appetitive for trade.

Australian Retail Sales Unexpectedly Decline

The Aussie looks stronger than pound despite a surprising decline in retail sales last quarter. In monthly terms, the indicator was weaker-than-expected in September, stressing the need for more stimulus measures.

Earlier today, the Australian Bureau of Statistics (ABS) said that retail sales had added only 0.2% in September, while analysts anticipated an increase of 0.5%.

The Reserve Bank of Australia (RBA) will meet tomorrow to decide the interest rate and update the monetary policy.

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