GBP/AUD Outlook:
The GBP/AUD pair is likely to decrease as it currently trades well below its recent average and is near recent lows. This decline is driven by ongoing pressure from expectations of a Bank of England interest rate cut.
Key drivers:
• Rate gap: The Bank of England's cautious stance on interest rates contrasts with the Reserve Bank of Australia's controlled increases, making the AUD more attractive.
• Risk/commodities: Volatility in commodity prices has strengthened the AUD, while uncertainty surrounding UK economic data adds pressure to the GBP.
• Macro factor: Rising unemployment in the UK has contributed to the downward pressure on the GBP amid fears of a slower economy.
Range:
Expect the GBP/AUD to test its recent lows and remain within its stable 6.5% range.
What could change it:
• Upside risk: A significant uptick in UK economic data could shift expectations about the Bank of England's interest rate decisions.
• Downside risk: Further weakening in UK employment figures or increased Australian commodity demand could push the GBP/AUD lower.