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- GBP/AUD spot rate at time of publication: 1.8467
- Bank transfer rates (indicative guide): 1.7820-1.7950
- Transfer specialist rates (indicative guide): 1.8030-1.8300
- More information on specialist rates here
The Australian Dollar has lost 2.40% in value against the British pound over the course of the past month, with a notable amount of that loss coming over the course of the past 24 hours amidst improved sentiment towards Sterling regarding Brexit negotiations and softer global markets that are weighing on the Aussie.
Foreign exchange strategists at Australian lender Westpac tell clients that they can expect further losses by the Aussie against Sterling in the near-term but ultimately an improvement in market sentiment towards year-end could limit the losses.
The Pound-to-Australian Dollar exchange rate 0.60% on Wednesday to reach 1.8486, a new four-month high.
Gains came amidst a broad-based rally in Sterling on news the EU and UK had agreed to intensify post-Brexit trade negotiations after the UK last week stepped back from talks accusing the EU of not negotiating in good faith.
A set of assurances offered by the EU this week have allowed the UK to come back to the table and negotiators are looking to reach a deal that can be put before leaders in mid-November.
Above: GBP/AUD daily chart with a potential upside target identified by Westpac (see below).
"The latest headlines on UK-EU trade negotiations are more encouraging, with hopes rising that an agreement will be reached to provide UK exporters greater access than the no-deal scenario," says Sean Callow, a foreign exchange strategist with Westpac.
Regarding the Australian Dollar's outlook against the Pound based on recent developments, "short-term risks look to be to the downside,"
Callow says the AUD/GBP exchange rate is likely to probe the 0.5350/60 area "as the Aussie underperforms the G10 on US election uncertainty and the RBA’s increasingly dovish stance, setting up fresh monetary easing on 3 November".
AUD/GBP going lower to 0.5350/60 equates with a rise in the Pound-to-Australian Dollar exchange rate (GBP/AUD) to 1.8656/1.8691. (For the latest year-end to third-quarter 2021 GBP/AUD forecasts from leading institutional analysts and investment banks including JP Morgan, Morgan Stanley, Lloyds and Barclays, please see the latest forecast download from our partners at Global Reach, here).
However, the Australian Dollar's downside against Sterling should be limited during November by the Bank of England which analysts are saying will likely expand its quantitative easing programme before year-end in order to support the economy which remains under pressure owing to fresh covid-19 outbreaks.
In addition, developments regarding U.S. politics over coming weeks are expected to resolve in favour of higher equity and commodity prices, which would prove supportive of the Aussie Dollar.
"In the US election, a Democratic ‘Blue Wave’ win would most likely support AUD/GBP as equities rally on the prospect of looser fiscal policy," says Callow.
Westpac's baseline scenario over the remainder of 2020 is for both AUD and GBP to trend higher against the U.S. dollar, with their year-end forecast 0.57 (AUD0.75 and GBP1.32).
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