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The Pound to Australian dollar exchange rate's (GBP/AUD) recovery is building momentum, and further advances are possible this week.
GBP/AUD rose 1.40% last week in its biggest weekly gain since July, and if the pair can close in the green today it would have completed a streak of six consecutive positive daily closes.
This speaks of improving near-term momentum, underwritten by the pair's break above the 100-day moving average (1.9490).
Zoning out, GBP/AUD has been tracking in a broad sideways trend since July and there is some interest located at the 1.9574 level:
The 1.9574 level has no real technical credential; it is a simple graphical level that indicates a congestion point that might have some magnetism for the rate.
It highlights that GBP/AUD is in the process of breaking higher back towards the upper end of the 2024 spectrum.
This means AUD buyers are now looking at relatively good levels from which to transact. Those with more of a risk tolerance and who can afford to wait could even set some buy orders for the September top-out level at 1.97.
Anything above here starts to encounter more sustained selling pressure, engendering higher risk for those who want to wait for even higher exchange rates.
GBP/AUD gains at the start of the new week come amidst weekend Tariff threats against BRIC nations from President-elect Donald Trump.
"The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER. We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs," said Trump on social media.
"The USD was the outperforming currency during the Asian session following a social media post by US President-elect Donald Trump saying he wanted the USD to maintain its reserve currency status," says David Forrester, Senior FX Strategist at Crédit Agricole.
"The AUD, often used as a proxy for Asian currencies given Australia’s strong trade links with the region, therefore took a hit on the back of the Trump social media post," he explains.
The AUD can remain vulnerable to further FX tensions centred on Trump tariffs, although we suspect the market will soon start to discount his threats and opt to wait for concrete actions once he takes the steering wheel in January.
Domestic data of interest this week includes Aussie GDP for the third quarter, but we don't think this will have much of a bearing on the Aussie Dollar.
The data are unlikely to shift the dial on Reserve Bank of Australia (RBA) rate cut expectations, with markets resigned to the RBA only moving on rates sometime in the second quarter of 2025.
This puts the RBA in the slow lane, which unambiguously supports AUD.
"We continue to think the RBA remaining on hold will underwrite the AUD/USD during a volatile period of USD strength. We have an end-2024 forecast for the exchange rate of 0.65 and an end-Q125 forecast of 0.64," says Forrester.
There are no major releases or events due from the UK this week.
An original version of this article can be viewed at Pound Sterling Live