Consensus projections for the next four quarters, compiled from leading investment banks.
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The pound to Australian dollar exchange rate may need further room to catch its breath after an intense selloff that pushed the pair to fresh multi-year lows.
GBP/AUD opens the week at 1.9314, rebounding from last week’s trough at 1.9080. The recovery is consistent with consolidation following a near-uninterrupted decline, and a further drift northward to 1.94 over the coming five days would not be surprising.
But, we're wary of the sheer strength in the selloff and we would be very defensive here as the pair could easily dip back to 1.9080 and then hit new multi-year lows. So our conviction for the 'breather' to take GBP/AUD higher is quite fine at 60/40.
Fundamentally and technically, this is still a market that wants to go lower.
"All in all, any respite in the pound seems likely to be temporary before politics comes back into focus, and we retain short GBPAUD exposure," says a weekly FX research note from Barclays.
Key drivers of ongoing AUD outperformance:
- Investors are pricing in further Reserve Bank of Australia interest rate hikes.
- The Australian dollar is positively correlated with China’s rising yuan (CNH) because of Australia’s trade exposure and regional linkages.
"A bullish CNH outlook radiates out to the rest of the region," says RBC Capital Markets in a February 10 FX strategy update.
Week Ahead Forecast (Highest Probability)
- Base case: consolidation between 1.91-1.94
- Upside extension toward 1.94 possible
- But bigger risks skewed downard multi-week and a move toward 1.9080
Strategic Overlay for GBP/AUD Payments
Those needing to buy AUD (sell GBP) should treat any move toward 1.94 as an opportunity to secure cover, as the broader structure still favours AUD strength. Those needing to sell AUD (buy GBP) can afford some patience during this consolidation phase but should remain cautious, as a break below 1.9080 would likely accelerate losses.
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