AUD/GBP: Keeping trend lower – Westpac
|It is not surprising that the Australian dollar has underperformed among G10 currencies, as the Covid-19 outbreak has dominated market attention over the past month, with only NZD weaker. Meanwhile the British pound has limited its decline against a dominant USD to about -1%. Sean Callow, Senior Currency Strategist at Westpac Institutional Bank, analyzes the AUD/GBP outlook.
“Markets were divided on the BoE steady decision but we expected the steady 0.75% bank rate, given the post-election surge in UK business confidence and ongoing strength in the labour market.”
“The UK economy will also feel some impact from Covid-19, but not nearly as much as Australia’s, where 78% of exports head to Asia. The RBA’s clear reluctance to cut rates again lends some support to AUD by keeping market pricing for a cut to 0.5% below 50% until May.”
“Also providing some insulation for A$ as Australia’s trade surpluses shrink is an overhang of short A$ positions, implying plenty of bad news is priced in.”
“We expect disappointing Australian growth and unemployment data to force the RBA to resume easing policy, keeping AUD trending lower against the pound, eyeing AUD/GBP 0.50 or GBP/AUD 2.00 multi-week.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.