GBP/AUD Outlook: Slightly weaker, but likely to move sideways as the rate remains below its recent average and lacks a strong driver.
Key drivers:
- Rate gap: The Bank of England is expected to keep interest rates unchanged, while growing expectations for the Reserve Bank of Australia to raise rates may support the AUD more strongly.
- Risk/commodities: A recent drop in commodity prices, particularly precious metals, is pressuring the AUD, aligning it with risk-sensitive assets as investors reassess their portfolios.
- One macro factor: Recent data indicates that China's manufacturing activity remains weak, which could further put pressure on Australian exports and consequently the AUD.
Range: GBP/AUD is likely to hold within its recent range, with minor fluctuations but no significant moves expected towards either extreme.
What could change it:
- Upside risk: A surprise rate cut from the BoE could weaken the GBP and support a rise in GBP/AUD.
- Downside risk: Strengthened U.S. dollar performance may further diminish demand for the AUD, causing GBP/AUD to decrease.
