Credit Agricole CIB Research likes short GBP/USD as a better hedge for risk-off conditions than short AUD/USD.
"Growing market expectations of Fed policy normalization have recently given a boost to both the USD and the UST yields...We therefore think that investors will increasingly look for hedges – currencies that could be vulnerable in an environment of growing UST yields and risk aversion," CACIB notes.
"Our historic sensitivity analysis has suggested that the AUD and the GBP stand out as the most vulnerable currencies in G10 to the combination of higher UST yields and intensifying risk aversion. We believe, however, that the GBP maybe the better hedge in the current circumstances given that the AUD is looking oversold and undervalued according to our positioning and fair value models. We therefore stick with our short GBP/USD position," CACIB adds.