Pound-Australian Dollar: War is Just Another Reason to Keep Selling this Week
- Written by: Gary Howes
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GBP/AUD is forecast to reach new lows near 1.8825 this week.
Pound sterling is vulnerable to further weakness against the Australian dollar this week as a spike in global oil prices piles pressure on GBP/AUD.
The pair trades at 1.8905 at the time of writing on Monday, putting it a quarter of a per cent down on the day, and it's hard to feel that we're not starting down the barrel of an eleventh consecutive weekly decline.
It's a remarkably strong downtrend, one of the few genuine trends underway in global FX, courtesy of a host of pro-AUD factors that coincide with a genuine lack of demand for sterling.
This latest leg of the selloff owes itself to the market reaction to the ongoing conflict between the U.S. and Iran: oil prices and the dollar are up and stocks are down.
Typically, the Aussie dollar would be expected to lose value under such circumstances, as it has historically commanded a 'high beta' to global sentiment, meaning it has traditionally fallen when stocks are down.
But, not so in 2026: there's no keeping the Aussie dollar down. Instead of falling, investors have pivoted to the view that rising oil and gas prices are actually good for a net gas producer like Australia.
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What's more, the country's remoteness from the conflict is seen as a tick.
On the other hand, the UK is a net energy importer, which makes it very sensitive to an oil price shock: just as the country's world-beating inflation rates start to come down, a new impulse arrives.
It means the window on Bank of England rate cuts has narrowed markedly, and households and businesses might not receive the relief they were hoping for just a week ago.
The GBP/AUD daily chart is significantly oversold with the RSI back below 30 and pointing lower. In my years covering currencies, I can't recall seeing an RSI that has been so consistently in the red, meaning it's become a redundant indicator of looming rebounds from oversold conditions.
Based on the direction of travel and momentum, GBP/AUD is conservatively forecast to reach new lows near 1.8825 this week.
