27 Apr 2016
AUD to outperform GBP until Brexit vote - Westpac
Sean Callow, Research Analyst at Westpac, suggests that despite recent gains, rallies in the pound are unlikely to be sustained as markets continue to place a significant risk premium on sterling due to political division and business uncertainty over Britain’s place in the EU ahead of the 23 June referendum.
Key Quotes
“Even if polls shift towards “stay” in the weeks ahead, the pound should remain an underperformer. The lack of plausible rate hike risk at the BoE adds to the pressure on the pound. AUD took a hit on Australia’s low Q1 CPI but if the RBA holds steady as we expect, AUD should make another run towards GBP 0.5450/0.5500 or GBP/AUD 1.82-1.83 during May.
After 23 June however, the “stay” vote we expect should produce a sharp decline in AUD versus GBP, while the recent commodity price surge should succumb to gravity multi-month. Q2 is thus likely to produce AUD's highs versus the pound for this year.”
Key Quotes
“Even if polls shift towards “stay” in the weeks ahead, the pound should remain an underperformer. The lack of plausible rate hike risk at the BoE adds to the pressure on the pound. AUD took a hit on Australia’s low Q1 CPI but if the RBA holds steady as we expect, AUD should make another run towards GBP 0.5450/0.5500 or GBP/AUD 1.82-1.83 during May.
After 23 June however, the “stay” vote we expect should produce a sharp decline in AUD versus GBP, while the recent commodity price surge should succumb to gravity multi-month. Q2 is thus likely to produce AUD's highs versus the pound for this year.”