Pound-Australian Rate Dollar Supported at 1.9116 Near-term

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A pullback in GBP/AUD found some buying interest, global sentiment remains supportive.

The Aussie dollar's comeback against the pound has been interrupted by another deterioration in global sentiment linked to confirmation by the U.S. President that operations against Iran would last another two to three weeks.

That tempered hopes the President was ready to announce the steps that would be taken to exit his military foray into the Middle East.

The Australian dollar hasn't had a good war, as its distinct outperformance evaporated when the bombs started to fall in early March.

"The recent reversal in AUD/USD will likely continue if the energy crisis drags on," says Daniel Von Ahlen, an analyst at TS Lombard, the independent research house.

GBP/AUD dropped a hefty amount during January and February but March brought stabilisation and then a recovery; the exchange rate rose from a low at 1.8709 to 1.94 by March 27. It then retreated to 1.9116 and found support; it's a level that was the previous February-March resistance area, so it does appear to have some technical gravitas near-term.

At current levels, specialist transfer rates on GBP/AUD sit around 1.9063 and bank transfer rates closer to 1.8650; check bank versus specialist providers to help boost your transfer budget.

If the identified support level holds, further gains are possible, with 1.94 being the initial target.

Those with Australian dollar payments who can afford to set a rate order at or near 1.94 could capture that move automatically rather than relying on catching the moment it arrives.

Fundamental developments favour further GBP/AUD upside: two to three weeks of war won't help, but neither will domestic interest rate developments.

The AUD strengthened in recent months as global investors saw Australia offer increasingly attractive investment opportunities on the back of expected RBA interest rate hikes.

The central bank has already raised rates twice this year, but the Iran conflict means interest rates will likely rise elsewhere, which diminishes the AUD's relative rates appeal.

And, how much further can the RBA really raise rates when fuel shortages in Australia are helping diminish consumer and business sentiment, sucking some of that excess demand out of the economy?

The Australian dollar's rally has become "increasingly crowded at a time when rate hike expectations already look hawkish," says Von Ahlen.