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.”
