GBP/AUD Outlook:
The GBP/AUD exchange rate is likely to decrease as it is currently trading well below its recent average and near recent lows. UK political uncertainty and its impact on the pound add pressure.
Key drivers:
• Rate gap: The Bank of England's interest rates are higher than the Reserve Bank of Australia's, supporting the GBP in a normal market but overshadowed by political concerns.
• Risk/commodities: Recent geopolitical tensions are causing a downturn in investor appetite, negatively impacting the AUD, despite its earlier strength.
• One macro factor: The ongoing uncertainty regarding Keir Starmer’s position following the Gorton and Denton by-elections may further weigh down the GBP.
Range:
Expect GBP/AUD to drift within its recent range as it tests the lower extremes.
What could change it:
• Upside risk: A Labour win in the by-election could restore confidence in the GBP.
• Downside risk: Continued political uncertainty in the UK may drive the pound lower.