It’s not the Moody’s downgrade which is likely to have the biggest impact on the GBP, although fixed income flows into UK Gilts will be affected, but it’s next week’s MPC meeting which the market is now eyeing with trepidation. There is an increasing feeling in the market that QE4 will be announced and if it is, then we can expect GBP selling to intensify across the board.
I know a few people have been looking to GBP/AUD as a way of playing this and I must say that does make sense. This is not a pair I follow closely but a quick look at the charts suggests that a bullish retracement is underway so be patient and stick a ‘silly’ offer in somewhere; you never know you might get filled if volatility increases.