Westpac: GBP Vs. AUD: Rate Hike Jitters Cancelling Out?

Westpac note that "the Aussie made steep gains against sterling in October, but with both the RBA and Bank of England starting November with more dovish than expected decisions, AUD/GBP may be in for a period of consolidation."

• "In October A$ gained against all G10 currencies as energy and industrial metals prices surged. The jump in global yields helped both currencies to a degree, but AU yields rose more, reinforcing A$ gains."
• "The RBA delivered a sharp blow to the Aussie at its 2 Nov meeting. While dropping the 0.1% Apr 2024 bond target, Governor Lowe made clear that the RBA's base case was no rate hike until 2024, with 2023 possible but 2022 very unlikely. Meanwhile QE will continue until at least Feb 2022."
• "The BoE decision on 4 Nov to hold the bank rate at 0.1% sent yields tumbling, given pre-meeting hawkish comments from officials including Governor Bailey. Markets are now not fully priced for a rate rise until Feb 2022. However, the QE program looks set to conclude next month."
• "Australia's vaccination rate is edging above the UK's and reopening should drive a sharp rise in Q4 GDP. The BoE has cut its Q4 GDP forecast to a still-decent 1%qtr."
• "We see near term risks of a test of AUD/GBP GBP0.5380/0.5400 or GBP/AUD AUD1.85/1.86 but our year-end baseline is 0.54/1.85, then 0.55/below 1.82 in Q122."