GBP/AUD Stalls at Key Barrier

Potential support for GBP/AUD can still emerge in the event of global risk sentiment taking a turn for the worse: we saw the pair rise in March as the Iran war gripped markets, confirming the Aussie to be sensitive to periods of deteriorating global sentiment.

Overnight news that U.S. President Donald Trump is considering new military options against Iran has sent crude oil prices higher on Thursday as investors see the potential for an escalation in the conflict.
However, AUD has tended to rebound from these periods of anxiety, while also benefiting from a 'hawkish' central bank that has raised interest rates and could do so again.

"We expect the RBA to raise interest rates by 25bp on 5 May," says Adam Boyton, an economist at ANZ in Sydney.

ANZ says the RBA's decision-making board faces a combination of a tight labour market, elevated core inflation and upside risks to inflation expectations.
This should see it deliver a hike to the case rate to 4.35%.

"The decision will however be close, and we expect several members to vote in favour of keeping rates on hold," adds Boyton.

A 'sell the fact' reaction in AUD to the hike becomes all the more likely if the RBA hints it is ready to pause and keep interest rates steady.

If so, GBP/AUD can find itself better supported in early May.