GBP/AUD Forecast to Hit 1.90 GBP/AUD
- Written by: Will Peters
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Those looking to buy Aus dollar’s with the pound sterling (GBP) will be buoyed by forecasts that see the GBP/AUD hitting 1.90 in coming weeks.
The news comes after another difficult period of trading for the Australian currency; a state of affairs analysts believe will likely continue.
There is no shortage of suggestions amongst analysts that the AUD remains overvalued by historical standards. However, the timing and trajectory of the expected correction to a more sustainable exchange rate is difficult to call.
- At the time of writing the British pound to Australian dollar exchange rate (GBP/AUD) is seen offering a conversion of 1.8700.
- The Aus to pound sterling conversion rate is therefore at 0.5342.
NB: The above quotes are taken from the wholesale market and your bank will affix a spread at their discretion. However, an independent FX provider will guarantee to undercut your bank’s offer, thereby delivering up to 5% more currency.
To gaurd against currency fluctuations we recommend discussing a trading strategy whereby optimal levels are automatically executed.
Forecasting a Higher Sterling / Aussie Rate
The theme of a falling AUD still has further to play out if Australian economic data continues to disappoint.
The RBA expects that a weaker Australian dollar will offset softness in parts of the economy.
“Yet, this is only really true if the weakness wasn’t the result of falling commodity prices and soft economic numbers. In fact, on a trade-weighted basis the Australian dollar is stronger than it was at the beginning of the year, thus it would likely have fall further before the RBA becomes more comfortable with the level of the exchange rate,” says Chris Tedder at Forex.com.
Concerning the outlook Tedder reckons:
“From a technical standpoint, a confirmed break of resistance around 1.8700 would strengthen our bullish fundamental outlook for GBPAUD, especially given how easily AUDUSD is falling.
“There is a bullish crossover in weekly MACD and RSI is entering bullish territory. Beyond here we are eyeing another import resistance zone above 1.9000 – high since 2009.”
Pound is Currency of Choice
In a note to clients Tedder says the pound has been a currency of choice for traders looking to play US dollar weakness, a trade which received another small boost with the release of Osborne’s Autumn Statement overnight.
“UK growth forecasts were revised higher for this year and next and the unemployment rate is expected to fall. The positive impact on the GBP was only mild, but it was bolstered by softer than expected US ADP employment numbers,” says the analyst.
Meanwhile, the Australian dollar has sunk to a new four-year low against the USD dollar on the back of increased speculation that the RBA will cut interest rates ever further.
This wasn’t helped by very soft Q3 GDP numbers yesterday. GDP expanded by a measly 0.3% last quarter, completely missing an expected 0.7% growth rate.
“The more disturbing news is that Australia is now in a technical income recession, with real gross domestic income falling 0.4% last quarter, after falling 0.3% in the prior quarter,” says Tedder.
The data highlights the problems facing the RBA as it attempts to grapple with waning mining investment and soft domestic demand, while also trying not to stock further price pressure in the property market.
“There is also the threat that Australia’s last line of strong growth, its still strong export market, will collapse under worsening economic conditions in China, Australia’s biggest trade partner,” notes Tedder.
It was too long ago that Australia was expected to begin tightening monetary policy around the same time as the BoE, but not anymore.
“It’s true that the market has recently pushed out its expectations for higher rates in the UK and the BoE isn’t expected to raise interest rates anytime soon, but the BoE is now expected to become hawkish much sooner than the RBA due the aforementioned weaknesses in the Australian economy,” says the Tedder.
