AUD/GBP has been contained to a narrow 0.51-0.52 lateral range recently. Conflicting yield and commodity price signals appear to be constraining the cross. We anticipate AUD/GBP will remain choppy and stuck, mostly between 0.51-0.52 in Q2, and we expect mild upside to develop in H2, taking the cross to the 0.54-0.55 region by year’s end.
On the plus side, yield spreads have swung in AUD/GBP’s favour as markets price the prospects of more BoE rate cuts (-71bp to end-2024) than the RBA (-42bp to end-2024).
The main risk to AUD/GBP, and the key factor capping it currently, is the softening price trend in Australia’s key commodity exports. China’s economy is stabilising, but it is an unbalanced factory sector led-recovery.
- Westpac Strategy
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