GBPAUD Mean-Reversion Lower, Tactical Aligns to Cyclical

  • Tactical (1-3m+ outlook) and cyclical (6-12m+ outlook) indicators are aligning to bet on lower GBPAUD
  • Our LPPL (Log Periodic Power Law) models are flagging the end of the current LPPL bubble, which is further corroborated by VP Analog and VP Fast Money.
  • Cyclically, the policy divergence between the UK and Australia is extreme. Historically, it has usually paid to bet on mean-reversion of extreme policy divergences.
  • Structurally (2-3y+ outlook), the key data is more mixed. The UK remains capital-scarce relative to Australia (supporting GBP), but the UK runs a significant current account deficit (a persistent GBP vulnerability).
Portfolio WatchFXGBPAUDTacticalCyclicalStructuralAustraliaUK