Scope for AUD/GBP to trade down to the 0.56 area - Westpac

Martina Song, Research Analyst at Westpac, explains that while we should see AUD rise against GBP in the weeks ahead, there is scope for AUD/GBP to trade down to the 0.56 area (GBP/AUD up to 1.78) before rebounding towards 0.5950 (1.68).

Key Quotes

“Short term, Brexit uncertainties have been outweighed by the June 8 general election in the UK. The announcement of the early election mid-April saw GBP rally sharply, and polls suggest Prime Minister May’s Conservative Party is set to increase its majority considerably. But beyond that, renewed Brexit concerns or faltering consumer data could trigger a correction.”

“Meanwhile, as a risk proxy, AUD seems unlikely to do much better than hold its ground against USD if any US dollar weakness is due to political concerns, as the investigations into President Trump’s campaign team’s ties with Russia distract from passing legislation on tax reform or infrastructure.”

“The RBA though has remained optimistic and we expect Australian data to be supportive. Iron ore prices too are looking more stable, helped by a recent rise in steel prices.”