GBPAUD – Daily Chart
The GBP v AUD has slipped below some key resistance-turned-support and is at risk of a move lower toward the 1.93 area in the coming weeks. The 2.0 level has the potential for a medium-term high if the UK finances deteriorate with further tax hikes.
Data on Tuesday comes in the form of Aussie Westpac consumer data for January at 8:30am HKT. The indicator slipped by -0.2% in the month of December and economists will want an improvement. Australia’s household recession has continued for a seventh consecutive quarter, with economists blaming weaker wage growth.
At 4:30pm, the market will have a speech from the BoE’s Sarah Braden. The UK central bank’s policy maker brushed off last week’s jump in gilt bond yields and said she is willing to continue with further cuts to interest rates.
Despite recent moves, investors reduced their bets on the pace of interest rate cuts by the bank on Monday. Interest rate futures are now pricing about 43 basis points of reductions to the BoE’s Bank Rate by December 2025, with 2 cuts of 25bps expected.
Investors are bracing for more inflation pressures in the United States when Donald Trump becomes president and starts his US-centric policies. The market may also see higher rates as the answer to attract bond investment after recent panic.
The UK Prime Minister said he has “full confidence” in his Chancellor, saying she was doing a “fantastic job” but declined to say she would remain in place for his full term.
The British pound hit a fresh 14-month low and the UK’s bond yield rose to 4.9%. The 30-year bond is at a 27-year high.
Investors should keep an eye on the pound over the coming days and weeks as any changes to policy could see sharp volatility increases.