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The Pound-Australian Dollar rate could extend gains if Andrew Bailey reinforces November hike expectations, while weak Australian jobs data may keep the Aussie under pressure. The Pound to Australian Dollar (GBP/AUD) exchange rate raced higher on Thursday as investors reacted to Australia’s disappointing jobs report.

At the time of writing, GBP/AUD was trading at AU$1.9085. Up over 0.8% from the start of Thursday’s European session.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.325544 (+0.18%)

Australian Dollar to Dollar (AUD/USD): 0.692049 (-0.83%)

DAILY RECAP:

The Australian Dollar (AUD) retreated through Thursday’s Asian trading session after a surprise contraction in Australia’s labour market weakened expectations for further interest rate hikes from the Reserve Bank of Australia (RBA).

Data from the Australian Bureau of Statistics (ABS) showed that the economy lost 39,300 jobs in September, sharply undershooting forecasts for an increase of around 20,000 and marking the largest monthly decline since February 2025.

Meanwhile, the unemployment rate remained at 4.7%, its highest level in almost five years, after August’s reading was revised upwards.

The figures suggested that the Australian labour market may be losing momentum more quickly than previously thought, which in turn weakened expectations of further monetary tightening from the RBA, with a sharp rise in the odds of the bank leaving rates on hold through the remainder of 2026.

The Pound (GBP) trended broadly higher on Thursday after the UK’s latest GDP figures surprised to the upside, showing the economy continued to grow in August.

According to the Office for National Statistics (ONS), monthly GDP expanded by 0.1%, defying forecasts for a 0.1% contraction.

While this marked a slowdown from July’s 0.4% expansion, the figures suggest the UK economy remains remarkably resilient despite mounting global economic uncertainty and rising energy costs.

GBP investors welcomed the unexpected expansion in growth, as it both cements bets that the Bank of England (BoE) will begin tightening monetary policy in November, while also providing a little more fiscal headroom for Chancellor John Healey’s upcoming budget.

Near-Term GBP/AUD Forecast: Focus on BoE Bailey Comments Looking ahead to the end of the week, the primary catalyst of movement for the Pound to Australian Dollar exchange rate will likely be a scheduled speech by BoE Governor Andrew Bailey.

GBP investors will look to Bailey for more insight into the BoE’s policy outlook, with Sterling poised to rise if his remarks help to reinforce bets that the bank will raise rates next month.

Meanwhile, in the absence of any notable domestic data, AUD movement may be driven by market risk dynamics, with a cautious mood potentially piling more pressure on the ‘Aussie’.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

GBP/AUD falling wedge raises potential bullish breakout risk
UK–Australia yield spread correlations have weakened since August
RBA minutes and Australian jobs could challenge hawkish RBA pricing
Bailey's BoE commentary and US inflation data add to event risk
Summary
GBP/AUD is forming a potential bullish continuation pattern, pointing to the risk of an eventual breakout following its sharp rally over recent weeks. With a busy economic calendar in Australia and the UK over the coming days, there are several potential catalysts that could trigger a breakout, including the release of the RBA September meeting minutes, Australian unemployment data on Thursday, along with a string of Bank of England speeches, including from Governor Andrew Bailey.

Source: TradingView

GBP/AUD correlations: What could drive a breakout?
When assessing what could provide a fundamental catalyst to spark GBP/AUD volatility, the rolling 20-day correlation coefficient scores in the graphic below provide some clues.

Source: LSEG

You can see a strengthening positive correlation between GBP/AUD and UK–Australia front-end yield spreads during the September quarter, although it's noticeable that the relationship has deteriorated entering early October.

At the same time, there has been a modest, persistent inverse correlation between the pair and broader risk appetite, proxied in this analysis using S&P 500 futures.

While there's no guarantee either will spark a breakout, the relationships suggest that anything capable of changing the relative interest rate outlooks in Australia and the United Kingdom, or broader risk appetite, could provide the catalyst this week.

RBA minutes: Could hawkish expectations be disappointed?
The RBA's September policy statement was unsurprisingly hawkish, lifting the cash rate by 25 basis points to 4.60%. However, Governor Michele Bullock's subsequent press conference struck a less hawkish tone, revealing that the Board had only discussed holding rates or hiking by 25 basis points, with a larger 50-basis-point increase not even considered.

Bullock also acknowledged weakness in Australia's housing market, which to me represented something of a change in tone from preceding months, where the RBA seemed dismissive of downside risks created by the housing downturn following years of strong price growth.

With markets pricing a relatively punchy amount of additional tightening, there's a risk the minutes today may struggle to come across as hawkish as markets expect. As the graphic below shows, the implied probability of a November hike has eased in recent weeks, falling from 44% late last month to just 27% today.

Source: TradingView

And while inflation has dominated the RBA's thinking recently, increasing evidence of labour market softness could soon see it begin to focus on both sides of its dual mandate.

As the unemployment graphic below shows, Australia's jobless rate has risen significantly faster than the RBA anticipated, already sitting at 4.65%, well above the 4.5% average the Bank forecast for the December quarter in its August Statement on Monetary Policy.

Source: RBA, ABS

As such, another increase in unemployment in Thursday's September report carries the potential to see the RBA signal a prolonged pause, especially as the Governor has recently stated that an unemployment rate somewhere between 4.5% and 5% would probably remove enough pressure from the labour market to help ease inflationary pressures.

If such a scenario were to take place, and it is an if, it would likely weigh on Australian front-end yields, potentially providing upside support for GBP/AUD.

Will Bailey back BoE November rate hike expectations?
On the other side of the relative interest rate equation, markets are pricing around a 90% probability of a 25-basis-point Bank of England rate hike in November, putting Governor Andrew Bailey's various appearances this week in focus.

Having voted to leave rates unchanged in September, the key question is whether Bailey gives any indication he's prepared to support a hike next month. If he does, it would likely keep market pricing in place. However, if he were to signal doubts about the need for renewed tightening, it could take some of the heat out of UK front-end yields, potentially weighing on GBP/AUD.

Broader risk appetite could also influence the cross this week, with US CPI and PPI figures scheduled for Wednesday and Thursday respectively, alongside the start of the US corporate earnings season. Given GBP/AUD's persistent inverse relationship with S&P 500 futures, any deterioration in risk appetite could provide another catalyst for a breakout.

Falling wedge in focus

Source: TradingView

A clear coiling pattern has emerged in GBP/AUD since the start of October, following the sharp rally seen in late September. The subsequent structure resembles a falling wedge, a bullish continuation pattern, with the price now testing the upper end of the structure early in Tuesday's Asian session, ahead of the RBA minutes.

If we were to see a sustained bullish breakout that sticks, traders could consider initiating longs with a tight stop beneath former wedge resistance, targeting a return to where the structure initially formed at 1.91157. Before that, 1.90320 is a level of note, marking a double top formed earlier this month.

Of course, if a breakout fails to materialise and the price retreats towards the lower end of the wedge, levels of note include 1.89327, where the pair bounced on October 9, along with 1.89177, which has acted as both support and resistance over recent times.

The message from the oscillators is entirely neutral, putting greater emphasis on price action when assessing potential trade setups.

The Pound-Australian Dollar rate could remain supported if risk appetite deteriorates, while caution ahead of key BoE speeches may limit Sterling’s upside.
The Pound to Australian Dollar (GBP/AUD) exchange rate was steady on Tuesday

At the time of writing, GBP/AUD was trading at AU$1.8972. Virtually unchanged from the start of Tuesday’s European session.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.327225 (+0.40%)

Australian Dollar to Dollar (AUD/USD): 0.698265 (+0.22%)

DAILY RECAP:

The Australian Dollar (AUD) fluctuated on Tuesday, following another sharp deterioration in domestic consumer confidence.

The Westpac–Melbourne Institute Consumer Sentiment Index fell 4.7% in October to 80.4, marking its second consecutive monthly decline and leaving sentiment among the weakest readings recorded since the survey began in the early 1970s.

The deterioration in confidence followed last week’s Reserve Bank of Australia (RBA) rate hike, with the survey showing a particularly pronounced drop in sentiment among respondents questioned after the decision.

However, broader currency dynamics helped to partially offset these domestic headwinds, with a modest pullback in the US Dollar (USD) offering some support for risk-sensitive currencies.

The Pound (GBP) traded sideways on Tuesday morning, with a relatively quiet UK economic calendar leaving Sterling looking for fresh direction.

Attention was instead turning towards a scheduled appearance from Bank of England (BoE) policymaker Catherine Mann, with investors keen to assess whether the traditionally hawkish MPC member would reinforce expectations of further monetary tightening.

Mann was one of three policymakers to vote for a 25bps interest rate hike at the bank's September meeting, and her comments could strengthen Sterling sentiment if she signals support for a hike in November.

Near-Term GBP/AUD Forecast: Strong Inflation to Lift the 'Aussie'?
Looking ahead to the middle of the week, in the absence of any notable UK or Australian data, movement in the Pound to Australian Dollar exchange rate is likely to be dictated by wider market trends.

Of the two, the 'Aussie' is likely to prove the more sensitive to any shifts in market risk appetite, with AUD likely to give up ground if sentiment remains broadly downbeat.

Meanwhile, a gloomy mood may also temper GBP demand, while caution ahead of speeches by several BoE policymakers – including Governor Andrew Bailey – on Thursday may also cap Sterling.

Exchange Rates UK Research
Our currency coverage draws on live market data, official economic releases and published bank research.

Pound-Australian Dollar could extend gains if the Bank of England keeps the door open to higher rates after Australia's softer inflation weakens the Aussie. The Pound to Australian Dollar (GBP/AUD) exchange rate surged on Wednesday after weaker-than-expected Australian inflation sharply reduced expectations for another Reserve Bank of Australia interest rate hike.

At the time of writing, GBP/AUD was trading around AU$1.9161, up approximately 0.5% on the day.

Latest — Exchange Rates:

Pound to Australian Dollar (GBP/AUD): 1.920489 (-0.01%)

Pound to Dollar (GBP/USD): 1.335415 (-0.10%)

DAILY RECAP:

The Australian Dollar (AUD) tumbled through Wednesday's Asian session after Australia's latest inflation figures came in below expectations.

Official data showed annual consumer price inflation slowed to 3.9% in the second quarter, below forecasts that it would remain at 4.1%.

The weaker inflation reading prompted investors to further reduce expectations for additional Reserve Bank of Australia (RBA) policy tightening.

The ‘Aussie’ fell sharply as markets cut the implied probability of an August interest rate hike to the low single digits, with several major banks abandoning forecasts for near-term tightening.

Meanwhile, while the Pound (GBP) strengthened against the Australian Dollar, it traded in a relatively narrow range against most other major currencies as investors awaited Thursday's Bank of England (BoE) interest rate decision.

No policy changes are expected, leaving markets focused on the Bank's accompanying statement and any guidance from Governor Andrew Bailey.

Investors remain divided over whether the BoE could still raise interest rates later this year or instead keep policy unchanged before eventually resuming its easing cycle.

Near-Term GBP/AUD Forecast: Dovish BoE to Sink Sterling? Looking ahead, Thursday's Bank of England interest rate decision is expected to be the main driver of the Pound to Australian Dollar exchange rate.

If the BoE adopts a more dovish tone, Sterling could surrender much of Wednesday's gains and potentially retest recent lows against the Australian Dollar.

However, if policymakers warn that inflation risks are building again during the second half of 2026, expectations for another interest rate hike could strengthen and provide additional support for the Pound.

Meanwhile, any renewed escalation of tensions in the Middle East could continue to weigh on the risk-sensitive Australian Dollar through the second half of the week.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

Morgan Stanley expects the Pound to weaken against the Australian Dollar over the coming months, forecasting GBP/AUD will fall to 1.82, as improving sentiment towards Australia contrasts with growing political and fiscal risks in the UK.

The Pound to Australian Dollar exchange rate (GBP/AUD) traded around 1.93 on Monday after rebounding from June lows below 1.90, leaving the pair close to its highest levels of the year despite the bank believing the rally has gone too far.

Latest — Exchange Rates:
Pound to Australian Dollar (GBP/AUD): 1.917965 (-0.49%)
Pound to Dollar (GBP/USD): 1.345149 (-0.02%)
Australian Dollar to Dollar (AUD/USD): 0.701342 (+0.47%)

Morgan Stanley remains one of the more bearish investment banks on Sterling, arguing that much of the recent optimism surrounding the UK's political outlook has already been priced into the currency.

"We are bearish GBP."

The bank says Sterling rallied after reports that the incoming government could appoint a more fiscally conservative Chancellor than initially feared, but believes investors have already discounted much of that positive news.

"We think the market has priced in the 'good news' from the potential for a more fiscally conservative Chancellor than initial market expectations."

Morgan Stanley adds that there is still little clarity on the new government's economic agenda, while attention is likely to shift towards difficult fiscal decisions ahead of the autumn Budget.

"With so much good news already in the price, we think the hurdle for further upside surprises has moved higher."

In contrast, the bank retains a constructive view on the Australian Dollar. It points to resilient business confidence, attractive carry returns and expectations that Australian front-end yields will remain relatively elevated.

"We remain bullish on AUD."

Morgan Stanley believes steady labour market conditions and relatively hawkish Reserve Bank of Australia expectations should continue to attract investors seeking higher-yielding currencies.

Near-Term GBP/AUD Forecast: Morgan Stanley Expects Sterling to Give Back Recent Gains Reflecting these contrasting outlooks, Morgan Stanley continues to recommend a short GBP/AUD trade.

The bank has a target of 1.82, representing a decline of around 6% from current levels.

"GBP/AUD faces downward pressure from elevated risk appetite and a potential increase in GBP negative risk premium."

Morgan Stanley believes the combination of stronger Australian fundamentals and rising UK fiscal uncertainty should allow the Australian Dollar to outperform Sterling over the coming months, particularly if global risk sentiment remains supportive.