AUD downside should be more limited vs GBP - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the Bank of England’s aggressive response to the Brexit vote should weigh on sterling for some time.

Key Quotes

“The BoE MPC delivered a range of measures and suggested there is more to come. The pound has shown little inclination to recover the ground lost on the vote despite some potential bargain-hunting by foreign direct investors.

Meanwhile, AUD should continue to find support from resilient commodity prices, broadly positive global risk appetite and an absence of the near term threat of another RBA rate cut.

This points to AUD extending its recent gains against the pound to GBP/AUD1.66-1.67 multi-week. Further out (say Q4), AUD should start to slip back a little as supply growth catches up with commodity prices. But AUD downside should be more limited vs GBP than against, say USD.”