- GBP/AUD testing 1.90 amid further losses for AUD/USD

- USD strength, global growth fears, RBA all weigh on AUD

- AUD/USD seen risking fall to 0.70 & below in weeks ahead

- Could see GBP/AUD above 1.90, potentially as far as 1.95

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GBP/AUD reference rates at publication:Spot: 1.8931Bank transfer rates (indicative guide): 1.8268-1.8401Money transfer specialist rates (indicative): 1.8760-1.8790More information on securing specialist rates, hereSet up an exchange rate alert, hereThe Pound-to-Australian Dollar rate has remained on its front foot this week even as other Sterling pairs have softened and could potentially break above its recent range ceiling to rise as far as 1.95 in the weeks ahead, if analysts are right to warn that the Aussie is on the verge of a further breakdown.

Sterling has been trading throughout August in a range spanning the gap between roughly 1.8800 and 1.8938 against the Australian Dollar but has attempted this week to break out to new highs after the antipodean unit fell to new lows against the greenback, which are threatening to keep GBP/AUD elevated near or above that range ceiling for a while yet.

Monday's weaker than expected economic data from China, Tuesday's surprise slump in U.S. retail sales for July and still-solidifying expectations of a September Federal Reserve announcement of plans to taper its quantitative easing (QE) programme have all helped to lift the U.S. Dollar while pressuring the Aussie and other currencies from the outset this week.

But the Aussie has ailed further in its own right since Tuesday when minutes of the Reserve Bank of Australia's August meeting confirmed here's a lingering risk of the bank scrapping its plans to reduce the amount of government bonds bought under its quantitative easing programme each week from September.

"The intensification and broadening of the lockdowns increases the downside risk to the outlook. This might be enough to reach the RBA Board’s definition of a “significant setback.” We think taper delay will be actively discussed at the RBA Board’s September meeting, but it is too early to conclude that a decision to delay will necessarily be reached," says David Plank, head of Australian economics at ANZ.

Both domestic and international developments have been outright hostile for the Aussie thus far, with the global, regional and national economic outlooks dimmed by the slowdown in China while at the central bank level, the divergence between the RBA and some international counterparts couldn't have been made more apparent.

Above: Pound-to-Australian Dollar rate shown at hourly intervals alongside AUD/USD.

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The net effect has been new 2021 lows for the main Australian exchange rate AUD/USD, which has lifted the Pound-to-Australian Dollar rate to the top its recent range close to 1.90 even as the main Sterling exchange rate GBP/USD has itself beaten a swift retreat from the advancing greenback to open the new week.

"In our view, this move opens AUD up to further downside," says Carol Kong, a strategist at Commonwealth Bank of Australia. "There is a growing risk AUD dips below 0.7000 because of the negative Australia‑US 10‑year bond spread and slowing Chinese economic growth"

The Pound-Australian Dollar rate would rise further with any additional weakness in AUD/USD, likely reaching 1.95 if AUD/USD slips as far as the 0.70 level warned of by CBA's Kong.

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GBP/AUD would rise even further than implied by CBA's projection if as AUD/USD falls, the main Sterling pair GBP/USD stages a recovery from Wednesday's levels around 1.37.

This leaves much to be determined by the outcome of the RBA's September 07 monetary policy decision and the bank's view of how the intervening spread of coronavirus restrictions will impact the economy in the final quarter and beyond.

"The Board would be prepared to act in response to further bad news on the health front should that lead to a more significant setback for the economic recovery," minutes of the RBA's August meeting warned.

Above: AUD/USD shown at daily intervals alongside GBP/AUD.

Tuesday's minutes showed the RBA viewing the current quarter as an economic write-off that is better addressed by government fiscal policy, but otherwise proffered an upbeat outlook for the next quarter and beyond, citing government stimulus as well as its own enduring commitment to keep the cash rate at 0.10% until a point the bank currently estimates will be in 2024.

The latter is also something of a headwind for the Australian Dollar because financial markets have viewed the RBA as likely to lift its cash rate as soon as the latter stage of next year, although the most immediate rub for the currency is that since August's policy meeting "lockdown" has spread with the coronavirus and this week shuttered more than half the economy.

The risk of restrictions enduring beyond the current quarter has also been introduced, with the government suggesting that re-openings may be tied to progress of its vaccination campaign.

"As of 16 August, only 21% of the country’s population were fully vaccinated. Pay close attention to the jobs report on Thursday; the market expects the lockdown to increase the unemployment rate to 5.0% in July from 4.9% in June," says Philip Wee, a strategist at DBS Group Research, who tips AUD/USD for a decline to 0.70 by year-end.

Broadened and prolonged closures keep alive the risk of an RBA decision to enlarge or extend its QE programme and in turn are nurturing the appearance of divergence between the bank and counterparts like the Bank of England, Bank of Canada and Federal Reserve who're all in various stages of exit from emergency monetary policy settings or fast approaching them.

Above: GBP/USD shown at daily intervals alongside AUD/USD.

Divergence between the RBA and other central banks is a burden for the Aussie and a gift to the Pound-Australian Dollar rate, both of which will be sensitive this week to July's employment figures due out at 02:30 on Thursday.

"The RBA’s assumptions around covid restrictions and the near term economic outlook are looking increasingly optimistic. We now see a clear risk that the RBA will reverse its decision to taper asset purchases from September which is another headwind to AUD," CBA's Kong says.

Any sharper than expected increase in the Australian jobless rate on Thursday would likely to be perceived as negative for the Aussie, as it could signify that policymakers' estimates of the damage likely to be done by the containment measures are too optimistic

For the Pound-Australian Dollar rate everything depends on the extent to which AUD/USD remains under pressure in the coming weeks, and on whether GBP/USD is able to find its feet again after suffering heavy losses on Monday and Tuesday, given that GPB/AUD always closely reflects the relative performance of GBP/USD and AUD/USD.

To the extent that the above-pictured GBP/USD continues to decline alongside AUD/USD, it could limit the Pound-to-Australian Dollar rate's ability to rise, although any recovery by GBP/USD would likely lift GBP/AUD to new highs, especially if it occurs alongside further declines for AUD/USD.

"The AUD remains in a powerful 4-month downtrend," says Richard Franulovich, head of FX strategy at Westpac. "As we have done for several months, we continue targeting 0.72 on the downside with the A$ underperforming on crosses."

Above: Pound-to-Australian Dollar rate shown at weekly intervals alongside AUD/USD.