Pound-Australian Dollar Week Ahead: 1.89 in Prospect
- Written by: Gary Howes
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The Australian dollar shrugs its shoulders at news of the U.S. blockade of the Strait of Hormuz.
GBP/AUD is under short-term pressure and risks are pointed lower in the coming days: it opened the new week at 1.9124 but has since slid to 1.9039.
Geopolitics are driving the exchange rate again: weekend news of the U.S. blocking Iran-sanctioned shipping from transiting the Strait of Hormuz is top of mind, as the move will potentially lead to an escalation in hostilities.
All else equal, that's a negative for the Aussie dollar's prospects.
However, markets are relatively sanguine about the news: the Strait has been effectively closed since the beginning of March, and a drop from three ships a day to zero is hardly going to change the market's calculus.
For now, it looks as though the U.S. is trying to improve its hand at the negotiating table, and that will appeal to the perennial risk-on nature of financial markets.
Markets will therefore continue to look for the positives in all this: Hopes for a ceasefire and end to the Iran war have lifted the Australian dollar recently, helping pressure GBP/AUD.
Sure, GBP/AUD rose during March, but all evidence points to that gain being a relief rally and not the start of a turn in trend.
Losses to 1.89 are therefore expected in the coming days.
Above: GBP/AUD at daily intervals.
