AUD vs GBP: Sterling to remain under pressure - Westpac

Martina Song, Research Analyst at Westpac, notes that the GBP has tumbled sharply against all major currencies in the past month, including the AUD.

Key Quotes

“UK PM May’s announcement that formal negotiations would begin before Mar 2017 sparked concerns that there would be a “hard” Brexit. The pound remains sensitive to Brexit developments and there should be plenty of headlines to keep sterling trade volatile. Legal action against the Brexit process may sway sentiment to some extent but the likelihood of actually altering policy is slim at present.

Meanwhile, AUD/USD has remained fairly stable. A stronger US dollar has put pressure on the Aussie but against that, we’ve had polls swinging against Trump, RBA rate cut risks fading and commodity prices remaining resilient.

Broad USD strength and persistent uncertainty around Brexit should see GBP/USD extending lower, perhaps to around 1.20. Meanwhile, we see AUD/USD continuing to hover around 0.75. This would lead AUD/GBP (GBP/AUD) to remain at the higher (lower) end of recent ranges around 0.6250 (1.60).”