AUD/GBP Outlook:
The outlook for AUD/GBP is likely to increase, positioned significantly above its recent average and near recent highs.
Key drivers:
• Rate gap: The Reserve Bank of Australia's decision to raise interest rates enhances the appeal of the AUD compared to the Bank of England's decision to keep rates stable.
• Risk/commodities: Strong demand for Australian commodities continues to support the AUD, particularly with the ongoing influence of China's economic stability.
• One macro factor: Rising inflation in Australia has led to expectations of further rate hikes, providing a bullish backdrop for the AUD.
Range:
The AUD/GBP is expected to hold within its recent 3-month range with the potential to test new highs as market dynamics remain supportive.
What could change it:
• Upside risk: Further aggressive rate hikes from the RBA could strengthen the AUD even more.
• Downside risk: A shift towards a more cautious approach from the BoE could weaken the GBP, limiting the AUD's upward momentum.