- Australian Dollar (AUD) rallied to fresh 7 month high on Trump’s softer tone & encouraging Chinese data
- AUD suddenly dropped on reports some Chinese state-owned firms will halt US purchases
- Pound (GBP) trades mixed following as expected manufacturing PMI
- At 09:30 UTC GBP/AUD is trading -0.35% at 1.8420
The Australian Dollar is paring gains versus the Pound at the start of the week, although still adding to impressive gains across the previous month. The Australian Dollar rallied over 4% in May, settling on Friday at 1.8518.
At 09:30 UTC, GBP/AUD is trading -0.35% at 1.8420, having eased back from its low of 1.8343 reached overnight.
The trade sensitive Aussie Dollar reached a fresh 7 month high on Monday, as demand for riskier currencies picked up before slumping sharply. Positive signs surrounding China’s economic recovery and easing US – Chinese tensions helped to boost demand for the Chinese proxy, the Australian Dollar, before US Sino relations took a turn for the worse.
President Trump adopted a softer tone with China in his speech on Friday. He didn’t impose new tariffs on China Chinese officials much to the market’s relief.
Moreover, investors were also encouraged by Chinese Caixin purchasing managers index data, which showed an improvement in Chinese manufacturing activity last month.
However, optimism was quickly cut short amid reports that the Chinese government has requested that major agricultural firms pause purchases of US farm goods. This is a move which will undoubtedly infuriate President Trump, threatening to escalate already fragile tensions between the two powers. The risk sensitive Aussie Dollar declined following the report on Bloomberg.
Investors will continue to monitor US – Sino relations in addition to looking ahead to Reserve Bank of Australia’s monetary policy decision on Tuesday.
The Pound is trading mixed versus its major peers. A reduction in coronavirus infections and the death rate has led Boris Johnson to ease lockdown measures. Primary schools reopen today, and outside trading can also begin. Shops are all due to open on 15th June. The reopening of the British economy is underpinning sterling
UK manufacturing PMI showed that the sector contracted as expected last month. The IHS Markit/CIPS manufacturing PMI came in as analysts predicted at 40.7 in May, just marginally above the preliminary reading of 40.6. The level 50 separates expansion from contraction.
The sector continues its deepest downturn in recent history as restrictions to slow the spread of coronavirus caused widespread disruption. However, this is still a vast improvement on April, suggesting that the recovery is on the right track.
