GBP/AUD Update

We explained last week about the relative speed of UK and Australian interest rates possibly favouring the pound. This backdrop was given further credibility by price trading above the previous high of 1.9134. However, the geo-political situation changed last week as Russia invaded Ukraine. This action produced a response from the Western Allies in the form of aggressive sanctions levied on Russia. The suggestion from these events is now that those sanctions, whilst having a very negative affect on the Russian economy will possibly have a large negative affect on the UK economy. Primarily because London hosts so many Russian oligarchs and their finances. In this case, price has managed to trade below both supports at 1.8640 and 1.8400 and is now threatening to break below the upward sloping trendline, shown on the chart. This is called an "expanded flat" and could see price extend lower from current levels. There is support still at 1.8140, but the strength possibly envisioned last week could have been delayed at the very least.

Trevor Charsley, Senior Market Strategist at Corpay Cross-Border Solutions.