Flash: GBP/AUD showing signs of historical divergence – Westpac

FXstreet.com (New York) - According to Sean Callow, a Global FX Strategist at Westpac, “The relationship between the GBP/AUD and 2-year swap spreads has been fairly useful historically but began to diverge in mid-2011 as markets began to price in RBA easing.”

Moreover, the AUD has suffered limited damage, especially as the Bank of England felt compelled to ramp up QE again in response to domestic weakness in 2011. “The narrowing of the two-year yield spread has at least coincided with the rise in GBP/AUD since, say, March. Australia’s rates outlook should be more volatile than the UK‟s in coming months.” Callow adds.