During the session on Monday, we saw the British pound struggle a touch against the Aussie dollar, something that has been the case for a while.
GBP/AUD
During the session on Monday, the British pound has been relatively flat against the Australian dollar, although it did dip a little bit lower during the beginning of the session. Right now, the overall direction is quietly lower, with the broader structure going back a couple of years is a persistent downtrend.
Right now, this is predominantly a monetary policy divergence scenario between Australia and England. The RBA remains much more hawkish, with Australia's cash rate around 4.35%, while the Bank of England is approximately 3.75%. This differential continues to be a major driver for me at least, and I continue to look for yield in this environment.
Recent analysis has characterized this pair as being right around a 13-year low, with RBA hawkishness, BOE easing expectations, and, of beyond that, there are some political concerns in the UK contributing to weakness against the Australian dollar.
Monetary Policy Divergence and Technical Resistance
The commodity and energy exposure coming out of Australia also helps, and the favorable carry has me bearish on this pair.
Right now, it looks like there is pretty significant support near the 0.87 level, and then again at the 0.8535 level. The first resistance barrier is just above at the 1.88 level, with the 1.8950 level being even more resistant. This are being broken to the upside would open up further questions about the trend at the moment.
Some of the upcoming catalysts include a speech on Tuesday by Bank of England Governor Bailey, and the Australian NAB business data and Westpac confidence numbers this week as well. I remain bearish, but am also looking for a bit of value if it is offered on a bounce.
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