GBP/USD: Dollar Jumps vs Pound Amidst US - China Trade War

The British pound is higher against the Australian dollar on Thursday.

Markets were on the defensive with mounting US-China tensions reason enough for a retreat in the Australian dollar, which had just reached multi-month highs yesterday. Some potentially positive news in Britain’s fight against the coronavirus via a new track and trace program offered some solace to the pound.

GBP/AUD was up by 96 pips (+0.51%) to 1.8641 as of 4pm GMT.

After touching 7-month lows yesterday, the pound recovered to 1.86, pulled back to 1.855 but later rebounded again to end higher. Yesterday the exchange rate fell -1.02% and is down by -1.25% on the week so far.

GBP: Rebounds after negative rate talk

The rising prospect of negative interest rates has been another burden on the pound this week but the selling let up on Thursday.

Prime Minister Boris Johnson tweeted that a track and trace program would soon be ready for activation. If the technology works well it reduces the chance of a second wave of infections in the United Kingdom..

While the pound was taking a breather, UK fixed income markets were pricing in negative interest rates after the UK government issued its first negative-yielding bond on Wednesday. UK 2-year yields fell to a record low of -0.05%, having first fallen into negative territory in March but having been positive since.

AUD: Trade war risks brewing

The fracas between the United States and China over the latter’s role in the pandemic continues to escalate and another full-blown second wind to the trade war seems very possible.

As a key trade partner of China, a strategic partner of the United States and one of the countries that first called for an investigation into the origins of the coronavirus, Australia is uniquely at risk in any future trade war.

Another week in which millions more Americans applied for jobless benefits added to market weakness as Wall Street opened, which was weighing on the Aussie. US weekly initial jobless claims came in at 2,436,000 versus 2,400,000 expected. It continues a downtrend in claims but is still at mind-bendingly high levels.


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