GBP/AUD Outlook:
The GBP/AUD exchange rate is likely to decrease as it is currently below its recent average and near recent lows, influenced primarily by the easing inflation outlook in the UK and a cautious Bank of England stance. This aligns with Commonwealth Bank’s prediction that the GBP may be mildly favored if UK rates remain higher for longer.
Key drivers:
• Rate gap: The Bank of England's dovish outlook contrasts with the Reserve Bank of Australia's recent interest rate hikes, widening the rate differential in favor of the AUD.
• Risk/commodities: Stronger commodity prices, particularly gold, support the AUD's strength, enhancing its appeal against a weaker GBP.
• One macro factor: Ongoing political uncertainty in the UK affects the Pound, creating volatility amidst thin economic data.
Range:
Expect the GBP/AUD to hold within its recent range, testing lower extremes as pressure continues from UK economic signals.
What could change it:
• Upside risk: A surprising recovery in UK economic indicators could boost GBP confidence.
• Downside risk: Continued strength in Australia's inflation could lead to further AUD gains against the GBP.
