AUD/GBP trended lower in the first few weeks of 2022 but Russia’s invasion of Ukraine four weeks ago kicked off strong aussie outperformance on crosses. In the view of economists at Westpac, the pair may hit the 0.5740 January 2021 highs but move back lower to 0.55-0.56 by mid-year if energy prices ease.

AUD/GBP to trend back lower to 0.55-0.56 by mid-year if energy prices ease

“UK yields are still tilted higher, but near-term, risks are probably for the scale of BoE tightening to be trimmed as war continues, along with the energy price squeeze.”

“Australia in stark contrast is a massive net exporter of energy products. Its recent large trade surpluses will only grow, while the RBA deems the domestic economy to be resilient.”

“The jump in AU yields has boosted its pickup versus GBP to highs since 2018. Near-term scope to 0.5740 (Jan 2021 highs) but back to 0.55-0.56 by mid-year if energy prices ease.”