FOREX: GBPAUD Consolidates Below 2025 Lows, Down 3.5% This Year
Feb-06 09:53
- Weakness in the equity/crypto space on Thursday has added to the recent turbulence for precious metals, all combining to dampen the most recent enthusiasm for the Australian dollar, which was among the worst performing currencies in G10 yesterday.
- Despite this, idiosyncratic drivers in the UK have also weighed heavily on the pound, allowing GBPAUD to consolidate its notable 3.5% downswing in 2026. Downside momentum gathered pace on a break of 1.9959 in mid-Jan and was assisted by a break of trendline support, drawn from the Dec 2023 lows. Price has been able to consolidate below the 1.96 (2025 lows) this week, keeping bearish sentiment firmly intact for the cross.
- Downside targets for the move are located at 1.9218 and 1.8918.
- Deutsche Bank remain bullish on AUD, stating it still looks cheap vs relative rates on a short-term chart, and even more so on longer-term charts. They also note the return to high-yielder status could encourage more debt inflows, and think it’s noteworthy that AUD looks cheap vs commodity prices.
- The preliminary reading of Q4 GDP highlights the UK calendar next week, as well as the REC labour report, while speculation surrounding the political sphere will undoubtedly continue to drive short-term GBP sentiment. There are no tier-one releases in Australia, with household spending, consumer and business confidence readings all scheduled.
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GILTS: 10s Breach Long-Term Uptrend Support, Oct Lows Eyed
Jan-07 09:52
UK 10-Year yields have broken uptrend support drawn off the late ’21 lows (admittedly after several adjustments being made for similar breaches during ’25), which switches focus to the cluster of October and November lows (basing at 4.369%).
- Note that the base of a rising wedge is located below the cluster support (coming in at 4.332% today), although some would argue the breach of the uptrend drawn off the ’21 lows negates the importance of that support level.
Fig. 1: 10-Year Gilt Yields (%)
Source: MNI - Market News/Bloomberg Finance L.P.
FED FUNDS FUTURES: FFG6 Lifted
Jan-07 09:51
FFG6 paper paid 96.400 on ~10K
EUROPEAN INFLATION: HICP Tracking Remains Around 0.1pp Below Consensus
Jan-07 09:48
- Incorporating Dutch (2.48% Y/Y) and Austrian (3.9%) December HICP into our tracking estimate for Eurozone headline HICP, we still see risks skewed to the downside to the 2.0%Y/Y consensus (our unrounded tracking is currently at 1.92%), with Germany's surprisingly soft 2.0% Y/Y yesterday vs consensus 2.2% playing a sizeable role.
- Italian figures are the main remaining piece and can surprise in both directions, to be released simultaneously alongside the bloc-wide reading.
- A more material downside would be needed over the coming months to put any ECB cut discussions back on the table again.
