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The pound is set to remain under pressure against the Australian dollar over the coming days in sympathy with the untroubled downtrend.
The pound-to-Australian dollar exchange rate trades at 1.88, putting it just 100 pips above the March low at 1.87. We've been writing for some time now that 1.87 would likely be reached in mid-May owing to the predictability of GBP/AUD technical action over recent weeks.
With little indication that the trend is about to break anytime soon, fresh multi-month lows below 1.87 beckon over the coming weeks.
Monday sees GBP/AUD register a gain owing to a broader setback across the AUD strip linked to the downbeat mood music concerning the inability of the U.S. and Iran to strike a peace deal.
Although rising oil prices are weighing on 'risk on' currencies, such as the AUD, we note the downside damage is relatively shallow and we wouldn't expect this to rescue GBP/AUD from the well-entrenched downtrend.
Recent trading patterns suggest that bouts of elevated geopolitical uncertainty relating to the Iran war tend to result in a sideways consolidation period that is ultimately followed by another leg lower when pressure eases.
We think this means risks are asymmetric to the downside, and any progress in U.S.-Iran negotiations will drive fresh declines in GBP/AUD.
Consensus projections for the next four quarters, compiled from leading investment banks.
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