AUD vs GBP: BoE outlook weighs on GBP - Westpac

Research Team at Westpac, suggests that while recent data has been better than expected post-Brexit, the Bank of England signalled that it is prepared to cut rates further.

Key Quotes

“This, as well as the scale of its restarted QE program, is likely to continue weighing on GBP versus the AUD.

Positioning leaves GBP vulnerable to a squeeze but this would only be a correction before resuming its downtrend. Foreign direct investment and M&A activity have been supportive but these would need to persist to avoid further GBP slippage.

AUD has been supported by resilient commodity prices and decent domestic data. It has however been more sensitive to the uncertainty around central bank action. The bond sell-off, sparked by concerns around continued central bank appetite for QE, has seen the AUD suffer.

So, while there is scope for AUD/GBP to dip (GBP/AUD to squeeze), it should remain within recent ranges. Over the next month, we see the pair heading towards the 0.59 (1.69) level with GBP weighed down and AUD to remain stable.”