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In the two-month wave of USD weakness to early January, the aussie surged almost 9% and the cable about 4%. The rise in AUD in this time extended to almost AUD/GBP 0.5750 or GBP/AUD 1.74. Economists at Westpac expect the GBP/AUD pair to march forward to 1.8150 but believe the AUD should recover later in the year with GBP/USD falling to 1.6950 by the end of the year.

Key quotes

“With Victoria rebounding faster than expected after lockdown and repeated days of zero national local covid transmission, the RBA is set to raise growth forecasts.” 

“In the UK, daily cases have trended lower this month but with a recent 7-day average of 29k, restrictions will deepen the economic hole the UK needs to dig out of later in 2021. The pace of the UK vaccine rollout does offer hope over the economic rebound, however.”

“On balance, the global risk mood seems jittery enough near-term for GBP/AUD to extend towards 1.8150. But AUD should resume its gains even once the UK is recovering, with scope for 1.75 multi-week and a year-end forecast of 1.6950.”