GBPAUD: Party over for the pound? - Westpac

The Australian dollar’s weakness against USD over the past 3 months is second only to the kiwi, while the British pound has been best in the G10 in that time, boosted by the Bank of England’s first interest rate increase in 10 years, notes Sean Callow, Research Analyst at Westpac.

Key Quotes

“Into year-end, however, we see prospects for AUD to recapture some lost ground. If UK PM May’s government struggles with fiscal policy and Brexit into year end, then GBP/USD could slip to 1.28. The Aussie in contrast seems to be about fairly valued given yield spreads and commodity prices.”

“No major change in these fundamentals should leave AUD/USD around 0.76 by year-end. This would push AUD/GBP back to around 0.5950, GBP/AUD to 1.6800/50.”