GBP/AUD Outlook: The exchange rate is bearish, trading below its recent average and near the lower end of its three-month range.
Key drivers:
• Rate gap: The Bank of England has a cautious stance on rate cuts, while the Reserve Bank of Australia is signaling potential future rate hikes due to inflation concerns.
• Risk/commodities: Recent gains in the Australian dollar against the US dollar have been tied to better business confidence in Australia, but overall risk-appetite remains uncertain.
• One macro factor: Australia's upcoming inflation figures are crucial; an expected rise could prompt interest rate hike expectations from the RBA, supporting the AUD further.
Range: GBP/AUD is likely to drift within its recent range, constrained by the lack of clear direction from UK economic data.
What could change it:
• Upside risk: A surprising surge in UK economic data could boost the GBP relative to the AUD.
• Downside risk: Weak inflation figures from Australia could diminish support for the AUD, but caution remains due to ongoing geopolitical tensions.