AUDGBP: Risk premium on sterling in H1 – Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 23, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    Sean Callow, Research Analyst at Westpac, suggests that the Sterling has sustained heavy damage now that the stage has been set for 4 months of UK political division and business uncertainty over Britain’s place in the EU.

    Key Quotes

    “Even if polls tilt towards “stay” in the weeks ahead, the pound should remain an underperformer on crosses. The lack of plausible rate hike risk at the BoE adds to the pressure on the pound. This should see AUD extend gains as far as the GBP 0.5180/0.5200 area, GBP/AUD 1.93.

    Beyond this however, there should be sufficient political risk priced into the pound and enough weight on AUD from commodity prices to see the AUD rally falter. The 2015 AUD/GBP highs around 0.53 (GBP/AUD lows around 1.88-1.89) are unlikely to be reached and the cross should spend most of H2 2016 below AUD/GBP 0.50, above GBP/AUD 2.00.”
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