- GBP/AUD under pressure as the bulls ease off the gas.
- GBP will be sensitive to Brexit headlines, while AUD could be subjected more so to risk-off flows.
GBP/AUD is currently trading at 1.8223 between a range of 1.8211 and 1.8254 in the open ahead of what could be a roller-coaster week pertaining to Brexit headlines.
GBP has been under pressure on the back a subsequent Moody downgrading of the UK credit rating by one notch to Aa3 over the huge economic hit from the coronavirus crisis, Brexit and the lack of clear budget plans from Prime Minister Boris Johnson’s government.
Moody’s said Britain’s growth had been “meaningfully weaker than expected and is likely to remain so in the future.”
The downgrade was another blow for Johnson who is under fire from opposition parties and lawmakers in his Conservative Party for his handling of the pandemic, which has killed more people in Britain than anywhere in Europe.
Meanwhile, the UK-EU trade negotiations are set to continue this week suggesting limited downside to GBP depending on the headline flow.
On the UK data front, we should see a modest uptick in both headline and core UK September CPI (Wednesday) from rather depressed levels.
Also serving to weigh on the pound, the expectation of the extension of QE in the November's Bank of England meeting is being reflected through the value of the currency.
The odds of negative rates, on the other hand, will be primarily driven by the outcome of the UK-EU trade negotiations.
Looking ahead
Ahead of the above, today's China Gross Domestic Product will be a keen focus for Aussie dollar traders.
Reserve Bank of Australia's Governor Phillip Lowe’s recent hint about an extension of the bond purchase programmes to longer (10Y) maturities has the market in anticipation of the move happening as soon as the 3rd November policy meeting.
The minutes of the latest RBA policy meeting and a speech by Deputy Governor Guy Debelle may offer some more clarity for an Australian dollar that is now otherwise highly vulnerable to more risk-appetite contractions considering the easing bias at the central bank.
GBP/AUD levels
AUD/USD ranged sideways between 0.7075 and 0.7095.
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