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GBP/AUD remains flat as trade war tensions increase

21 May 2020

The GBP/AUD remained flat due to the trade tensions between the U.S. and China. The Australian Dollar suffered losses, declining from the 10% peak. The trade war escalated this week after Donald Trump’s comments about China’s way of handling the coronavirus. 

National Australia Bank’s currency strategist Rodgrio Catril said, “The ‘Aussie’ has been tracking sentiment pretty closely, and today’s move lower in S&P futures is being reflected in the ‘Aussie’, which is a reflection of the broader dynamic.”

Furthermore, after reports showing the UK’s economic contraction in May, the British Pound is rangebound with the American Dollar, as the GBP/USD exchange rate holds to 1.22. 

Reports showed that in the UK, the flash composite purchasing managers’ index (PMI) increased to 28.9 in May, compared to the 13.8 last month. In order to avoid an economic contraction, the PMI has to reach the 50.0 mark. 

The survey was carried out by IHS Markit. Economist Chris Williamson explained, “‘Travel and tourism firms, hotels, restaurants and producers of consumer goods such as clothing were again the hardest hit, reflecting virus containment measures. But this remains a shockingly broad-based downturn with very few companies left unscathed.”

On the other hand, the EUR/USD pair fell below the 1.10 mark after China’s threat to retaliate the mentioned U.S. sanctions.