Track market-moving stories before they get noisy

The British pound has rallied to a four-week high as resilient UK employment data and hawkish Bank of England expectations support sterling ahead of today's inflation report. With a November BoE rate hike almost fully priced in, it may require an upside inflation surprise to provide another tailwind. GBP/USD bulls are eyeing a break above the 200-day EMA, while GBP/AUD shows signs of a potentially larger bullish reversal.

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British Pound Strengthens Ahead of UK CPI as BoE Rate Hike Looms
UK Employment Resilience Keeps November BoE Hike on Track
The Bank of England (BOE) remains on track to hike in November after Tuesday's employment report provided further evidence of a resilient UK economy. Unemployment fell to 4.7% from 4.9% in September according to ONS, payroll employment rose by 13,000 in September, and regular wage growth reached 3.7% y/y, above expectations. That said, vacancies fell to 691,000, suggesting underlying labour demand remains subdued despite the headline improvement.

Money markets have almost fully priced in a 25bp hike to 4% on 5 November, with further tightening expected into 2027. BoE policymaker Megan Greene added to the hawkish narrative on Tuesday, warning that the risks of second-round inflation effects are greater than previously thought and reiterating the need for pre-emptive tightening. Her comments contrast with Governor Andrew Bailey's more cautious assessment that such pressures remain relatively subdued, highlighting divisions over how aggressively the BoE may need to respond.

Attention now turns to today's September CPI report, where headline inflation is expected to accelerate to 3.4% y/y from 3.1%. An upside surprise could reinforce sterling's interest-rate advantage, while softer inflation would challenge the extent of tightening currently priced into UK rates.

GBP/USD Technical Outlook: British Pound Eyes Further Gains
Sterling has rallied to a four-week high ahead of today’s inflation figures, fuelled by improving employment and wage data alongside scaled-back Fed rate bets. But GBP/USD bulls had to ride out a quick retest of the June low before the bullish reversal I hypothesised could get underway.

While resistance has been met around the 200-day EMA and 1.34 handle, the RSI (14) is back above 50 and nowhere near overbought. As we’re witnessing range expansion from a multi-week compression pattern at the end of a selloff, I suspect GBP/USD could have further to go to the upside. The RSI (2) warns of near-term exhaustion, though bulls may be seeking dips above 1.33 in anticipation of a break above the 200-day EMA.

Note the 1.3475 low and September VPOC at 1.3543 as potential upside targets for bulls.

Source: ICE, TradingView

GBP/AUD Technical Outlook: Inverse Head and Shoulders in Focus
Whether the inverted head and shoulders pattern on the weekly chart goes on to succeed remains to be seen, but it could take several weeks or months to play out if it does. Until then, I am focusing on whether we at least see the completion of the ‘right shoulder’ (RS) of the long-term bullish reversal pattern. This assumes a move higher towards the neckline around the June and March highs.

The daily GBP/AUD chart shows an explosive move out of a bull flag, though resistance was met around the 200-day EMA and monthly pivot point. Bulls could be seeking dips above the swing low around 1.859, though the monthly pivot point, high-volume node (HVN) and 1.90 handle also form a potential support zone to seek bullish reversal patterns.

Source: ICE, TradingView

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.

The Pound-Australian Dollar could remain sensitive to risk appetite, with geopolitical tensions potentially weighing on the Aussie and supporting GBP/AUD. The Pound Australian Dollar (GBP/AUD) exchange rate touched a near six-week high on Wednesday night before retreating through Thursday as profit-taking set in and positive Australian data supported the ‘Aussie’.

At the time of writing, GBP/AUD was trading at around AU$1.9039, down 0.3% on the day.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.324686 (-0.13%)

Australian Dollar to Dollar (AUD/USD): 0.695463 (+0.14%)

DAILY RECAP:

The Australian Dollar (AUD) initially touched a near six-week low against Sterling during Thursday’s Asian trading session, before regaining ground thanks to upbeat trade data.

Australian trade rebounded in August, with exports up 3.7% and imports up 5.8% month on month, following contractions in both in July. As international trade is a key part of Australia’s economy, the positive trade figures underpinned the ‘Aussie’.

AUD also drew some support from Australia’s final manufacturing PMI for September, which was revised up from 49.3 to 49.6.

Furthermore, rising commodity prices – particularly iron and coal – also supported the resource-linked Australian Dollar.

These multiple factors helped the ‘Aussie’ regain ground despite a risk-off market mood.

Meanwhile, the Pound (GBP) lacked a clear direction on Thursday as market-moving British data was thin on the ground.

The only release was the UK’s final manufacturing PMI for September, which was revised marginally lower. The survey score came in at 51.9, up from August’s 51.7 but slightly below the preliminary result of 52.

This lacklustre reading had little impact on Sterling either way, leaving GBP to trade on wider market trends and move without a clear trajectory overall.

As a result, the Pound was unable to hold at the near six-week high struck against AUD during Thursday’s Asian trading session, with the UK currency suffering some profit-taking.

Near-Term GBP/AUD Forecast: Risk Appetite in Focus Looking ahead, economic releases from both Australia and the UK are thin on the ground on Friday, likely leaving the GBP/AUD exchange rate to trade on wider market trends.

Risk sentiment could be the key driver of movement, with markets keeping a close eye on the conflicts in the Middle East and Ukraine.

Simmering geopolitical tensions and rising oil prices could sour the market mood, which would likely weigh on the risk-sensitive ‘Aussie’ and support GBP/AUD.

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

The Pound-Australian Dollar could remain supported after Australian inflation failed to materially revive near-term RBA hike expectations, while stronger UK GDP offered Pound Sterling some support. The Pound to Australian Dollar (GBP/AUD) exchange rate remained supported on Wednesday after the latest Australian inflation data failed to trigger a sustained recovery in the 'Aussie'.

GBP/AUD had already advanced after Tuesday's Reserve Bank of Australia decision, when the central bank raised interest rates by 25 basis points to 4.60% but struck a less hawkish tone than markets had expected.

DAILY RECAP:

The Australian Dollar (AUD) struggled for traction on Wednesday despite headline inflation accelerating sharply.

Australian consumer prices increased by 0.4% in August, while annual inflation rose from 3.5% to 4.0%.

However, underlying price pressures were less concerning.

Trimmed-mean inflation held at 3.6%, while the monthly underlying increase came in slightly below market expectations.

This prompted investors to reduce expectations for another RBA rate increase in November, with markets pricing only a partial chance of further tightening before the end of the year.

The data followed Tuesday's RBA decision, when policymakers raised rates to 4.60%, their highest level in 15 years.

RBA Governor Michele Bullock said the Board had also considered leaving rates unchanged and suggested that the four hikes delivered this year may already be exerting sufficient restraint on inflation.

This relatively cautious guidance left the Australian Dollar vulnerable to profit-taking and reduced expectations that the RBA will need to tighten policy aggressively again in the near term.

The Pound (GBP), meanwhile, received some support from stronger-than-expected UK growth data.

Final figures showed that the UK economy expanded by 0.5% during the second quarter, revised higher from the previous estimate of 0.4%.

Real household disposable income per head increased by 1.0%, while business investment was also revised sharply higher.

The figures reinforced evidence that the UK economy performed relatively strongly during the first half of 2026.

Prime Minister Andy Burnham's Labour conference speech also attracted attention after he signalled that the government would explore a closer future relationship with the European Union.

Near-Term GBP/AUD Forecast: RBA Hike Bets Remain Key Looking ahead, GBP/AUD could remain supported if investors continue to scale back expectations for another near-term RBA rate increase.

Headline Australian inflation remains uncomfortably high, but the stability in underlying inflation suggests that Tuesday's rate hike may be given time to work through the economy before policymakers act again.

A renewed increase in energy prices or another strong inflation release would still revive the case for further RBA tightening and could provide the Australian Dollar with support.

For the Pound, the stronger final UK GDP figures should provide some protection, although wider market movements and expectations surrounding the October Budget are likely to remain important drivers.

If RBA tightening expectations continue to fade while UK growth sentiment remains resilient, GBP/AUD could retain an upward bias in the near term.

Pound-Australian Dollar could remain sensitive to risk appetite, with a souring market mood likely to weigh on the Aussie. The Pound Australian Dollar (GBP/AUD) exchange rate fluctuated on Thursday as markets reacted to Australia’s latest jobs report.

At the time of writing, GBP/AUD was trading at AU$1.8813, virtually unchanged on the day.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.321344 (-0.19%)

Australian Dollar to Dollar (AUD/USD): 0.700945 (-0.34%)

DAILY RECAP:

The Australian Dollar (AUD) initially fell during Thursday’s Asian trading session as investors digested Australia’s latest jobs report.

New data showed that Australian unemployment rose in August, unexpectedly climbing from 4.5% to 4.6%. Meanwhile, full-time employment fell by 6,300.

However, the rise in unemployment was largely due to more people entering the workforce, with the participation rate jumping from 66.9% to 67.1%. Additionally, part-time employment beat forecasts, increasing by 39,500.

These positive elements of the release helped the Australian Dollar limit its losses and regain some ground as trade went on.

Meanwhile, the Pound (GBP) struggled to hold its overnight gains against the ‘Aussie’ amid fresh bond market turmoil and some softer UK data.

Gilt yields spiked on Thursday, nearing the 19-year highs touched earlier in the month, amid rising oil prices and growing bets on further Federal Reserve interest rate hikes. This in turn raised concerns about the UK’s fiscal position ahead of the Autumn Budget.

Additionally, weaker-than-forecast data from the Confederation of British Industry (CBI) also put some pressure on GBP, although its impact was limited.

Near-Term GBP/AUD Forecast: Risk Appetite in Focus Looking ahead, Friday brings a lack of UK and Australian economic data, potentially leaving the GBP/AUD exchange rate to trade on market risk appetite.

Any shifts in risk sentiment could drive volatility, while a prevailing risk-off mood could weigh on the ‘Aussie’.

Markets will be keeping an eye on events in the Middle East, amid tentative hopes for a US-Iran peace deal. Federal Reserve interest rate expectations are also likely to impact market sentiment, with fears of higher borrowing costs potentially dampening risk appetite.

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

The Pound-Australian Dollar rate could remain under pressure if UK PMIs disappoint, while stronger Australian jobs data may reinforce RBA hike expectations. The Pound to Australian Dollar (GBP/AUD) exchange rate fell back again last week, with the bulk of these losses following the Bank of England's (BoE) latest interest rate decision.

At the time of writing, GBP/AUD was trading at AU$1.8761. Down around 0.5% from the start of last week’s session.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.339468 (+0.29%)

Australian Dollar to Dollar (AUD/USD): 0.712549 (+0.15%)

DAILY RECAP:

The Pound (GBP) was muted through the first half of last week as investors responded to a mixed batch of UK economic data.

While Tuesday’s employment figures reported unemployment held steady in July, against forecasts it would rise, the data also highlighted underlying weakness in the UK labour market.

Wednesday’s consumer price index also failed to improve Sterling sentiment, as a bump in headline inflation last month was undermined as core inflation remained flat.

Sterling then faced more notable headwinds on Thursday as the Bank of England delivered its latest interest rate decision.

While the bank’s decision to leave rates on hold did not come as a surprise to investors and the BoE acknowledged growing inflation risks, GBP exchange rates still weakened as it remains one of the few major central banks not to have tightened policy yet this year.

The Pound then attempted to claw back some of its losses at the very end of the week as the UK’s latest retail sales data reported a surprise expansion in consumer spending in August.

The Australian Dollar (AUD) initially drifted lower last week, with the currency struggling to attract support as market risk appetite faltered in the face of soaring global energy prices.

Reinforcing the risk-off mood through the middle of the week was a hawkish interest rate hike by the Federal Reserve, which catapulted the US Dollar (USD) sharply higher.

However, AUD remained well positioned to rebound in the second half of the week thanks to ongoing Reserve Bank of Australia (RBA) rate hike bets, with expectations for a September hike being bolstered by hawkish remarks from RBA Governor Michelle Bullock at the end of the week.

Near-Term GBP/AUD Forecast: Dovish BoE to Sink Sterling? Turning to this week’s session, in terms of macroeconomic data, the next catalyst of movement for the Pound to Australian Dollar exchange rate will be the publication of the UK’s latest PMIs.

September’s preliminary PMIs could pile fresh pressure on Sterling if they report a moderation of activity in the UK’s private sector at the end of the third quarter.

Meanwhile, the focus for AUD investors will be on the publication of Australia’s latest jobs report in the second half of the week.

Expect the ‘Aussie’ to strengthen if a rebound in employment growth last month further bolsters RBA rate hike bets.

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

Pound-Australian Dollar could come under pressure if the Bank of England pushes back on rate hike bets, while improving risk sentiment may support the Aussie. The Pound to Australian Dollar (GBP/AUD) exchange rate rebounded from a three-month low last week as market risk appetite slumped.

At the time of writing, GBP/AUD was trading at AU$1.8835. Up almost 0.4% from the start of last week’s session.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.352622 (-0.01%)

Australian Dollar to Dollar (AUD/USD): 0.716529 (-0.08%)

DAILY RECAP:

The Australian Dollar (AUD) was initially resilient this week, with growing expectations of further interest rate hikes from the Reserve Bank of Australia (RBA) helping the ‘Aussie’ to weather a series of weaker domestic indicators.

Consumer confidence fell sharply in September, while the latest NAB survey also pointed to a deterioration in business sentiment.

Coupled with a subdued market mood, this left the ‘Aussie’ to trade sideways against the bulk of its peers through the first half of the week.

However, AUD struggled to sustain this support through the latter half of the week as risk sentiment deteriorated further as escalating tensions in the Middle East drove oil prices sharply higher, fuelling fresh concerns over global inflation.

The Pound (GBP) was flat through the first half of last week, with Sterling initially holding its ground as John Healey delivered his first major speech as UK Chancellor.

While GBP investors welcomed Healey’s optimism on growth, they were left a little wary about his evasive answers on tax policy.

Renewed turmoil across global bond markets then kept Sterling rangebound as they pushed UK borrowing costs sharply higher.

Concerns about the inflationary risks of rising energy prices propelled 30-year gilts to 5.82% at the UK government bond sale on Tuesday, their highest level seen since 1998.

The Pound then began to strengthen against its more risk-sensitive peers as we entered the second half of the week as the mood soured.

Sterling relinquished some of these gains as sentiment improved again on Friday, but was able to temper these losses with the publication of stronger-than-expected UK GDP figures.

Near-Term GBP/AUD Forecast: Dovish BoE to Sink Sterling? Looking ahead, the primary catalyst of movement for the Pound to Australian Dollar exchange rate this week will likely be the Bank of England's (BoE) latest interest rate decision.

Consensus estimates see the BoE leaving interest rates on hold when it concludes its September policy meeting on Thursday, placing the focus on the bank’s forward guidance.

If the bank maintains its cautious messaging and pushes back at all on speculation that it will hike rates later in the year, it’s likely to trigger fresh weakness in the Pound.

Meanwhile, in the absence of any notable domestic data, movement in the Australian Dollar will be driven by market risk sentiment this week.

This may see the ‘Aussie’ firm if the Gulf states and Iran can reach an agreement to at least temporarily reopen the Strait of Hormuz, in a meeting reportedly being held on Monday in Oman.

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

The Pound-Australian Dollar could remain under pressure if UK GDP disappoints, although weaker Australian confidence data may offer Sterling some relief. The Pound to Australian Dollar (GBP/AUD) exchange rate slumped to a fresh three-month low last week as the 'Aussie' continued to be underpinned by hawkish Reserve Bank of Australia (RBA) interest rate speculation.

At the time of writing, GBP/AUD was trading at AU$1.8796. Down roughly 0.5% from the start of last week’s session.

Latest — Exchange Rates:

Pound to Australian Dollar (GBP/AUD): 1.877176 (+0.05%)

Pound to Dollar (GBP/USD): 1.351857 (+0.01%)

DAILY RECAP:

The Australian Dollar (AUD) initially faced some headwinds last week as the turmoil in the global bond market prompted investors to limit exposure to risk-sensitive currencies.

However, the ‘Aussie’ subsequently staged a strong recovery, climbing to fresh multi-month highs against many of its peers following the publication of Australia's latest GDP figures.

According to data published by the Australian Bureau of Statistics (ABS), Australia's economy expanded by 0.4% in the second quarter, exceeding forecasts for a 0.3% expansion, while annual growth accelerated to 2.1% – also ahead of expectations for a 1.8% increase.

The data reinforced RBA rate hike expectations, with the odds of another 25-basis-point rate hike at the central bank’s September meeting rising to around 70%, up from roughly 50% before the GDP figures were released.

The Pound (GBP) faced significant resistance last week, with the currency being hit particularly hard by the sell-off across global bond markets.

UK gilts came under particularly heavy pressure, with the yield on 10-year government bonds climbing above 5.25% and briefly reaching its highest level since 2008, while 30-year gilt yields approached 5.9%, marking their highest level since 1998.

The moves reflected the broader global bond sell-off, but concerns over the UK's fiscal position added to the pressure on Sterling, with GBP investors concerned that the increase in borrowing costs could further erode the fiscal headroom available to Chancellor John Healey ahead of his first Autumn Budget.

Near-Term GBP/AUD Forecast: Soft UK GDP Print to Sap Sterling Sentiment? Turning to this week's session, the Pound to Australian Dollar exchange rate may come under pressure with the publication of the UK's latest GDP figures.

Consensus estimates predict month-on-month GDP growth will have slowed in July, which could weigh on Sterling as it further complicates the Bank of England's (BoE) policy outlook.

Meanwhile, Australia's latest consumer and business confidence figures may weigh on the 'Aussie' this week if they point to a deterioration in morale.

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

Pound-Australian Dollar could slip back if Australian GDP reinforces RBA hike expectations, although renewed risk aversion may keep the Aussie under pressure. The Pound to Australian Dollar (GBP/AUD) exchange rate trended higher on Tuesday as a cautious market mood weakened demand for risk-sensitive assets like the 'Aussie'.

At the time of writing, GBP/AUD was trading at AU$1.8958. Up around 0.3% from the start of Tuesday’s opening levels.

Latest — Exchange Rates:

Pound to Australian Dollar (GBP/AUD): 1.889968 (+0.03%)

Pound to Dollar (GBP/USD): 1.352508 (-0.17%)

DAILY RECAP:

The Australian Dollar (AUD) faced modest selling pressure on Tuesday as renewed military tensions between the US and Iran triggered a deterioration in market risk appetite.

The two sides exchanged strikes for the first time in several weeks, quashing hopes for a diplomatic solution to the crisis.

The escalation triggered a fresh rise in oil prices and prompted investors to adopt a more defensive stance.

However, the pressure on the Australian Dollar was partially offset by some encouraging Chinese economic data. China’s private RatingDog Manufacturing PMI rose to 51.5 in August from 50.9 in July, comfortably exceeding expectations and likely feeding greater demand for Australian exports.

While able to appreciate against its more risk-sensitive currencies, the Pound (GBP) traded in a relatively narrow range against most of its other peers on Tuesday as UK markets reopened following Monday’s bank holiday to a sharp rise in government borrowing costs.

UK 10-year gilt yields climbed to around 5.24% - their highest level since 2008 - as rising oil prices and renewed concerns over inflation fuelled expectations that central banks may need to maintain tighter monetary policy.

Elsewhere, an upwards revision to the UK's manufacturing PMI in August appeared to have little material impact on Sterling.

Near-Term GBP/AUD Forecast: Steady GDP Print to Lift the 'Aussie'? Turning to mid-week trade, the Pound Australian Dollar exchange rate may be pressured by the publication of the UK's latest GDP figures.

Wednesday's data is expected to show the Australian economy continued to expand at a steady pace of 0.3% in the second quarter of 2026.

While below the blistering pace of growth set at the end of 2025, the expansion should still be enough to underpin bets that the Reserve Bank of Australia (RBA) will deliver an interest rate hike later this month.

Meanwhile, in the absence of any notable UK economic indicators, any movement in the Pound through the middle of the week is likely to be dictated by wider market trends.

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

Pound-Australian Dollar could remain under pressure if RBA minutes revive rate hike bets, while a quiet UK calendar leaves Sterling reliant on wider market trends. The Pound to Australian Dollar (GBP/AUD) exchange rate traded in a wide range last week amid uneven UK economic data and a shifting market mood.

At the time of writing, GBP/AUD was trading at AU$1.9067. Down roughly 0.2% from the start of last week’s session.

Latest — Exchange Rates:

Pound to Australian Dollar (GBP/AUD): 1.90266 (-0.72%)

Pound to Dollar (GBP/USD): 1.36445 (+0.01%)

DAILY RECAP:

The Pound (GBP) traded in a wide range this week as a barrage of UK economic releases delivered a mixed picture of the domestic economy, leaving investors uncertain over the outlook for Bank of England (BoE) monetary policy.

The week began with softer-than-expected employment data, which showed unemployment holding at 4.9% while wage growth also slowed, with private sector pay increasing at its weakest pace since late 2020.

Sterling remained muted with the subsequent release of the UK's consumer price index, as an uptick in inflation failed to lift expectations for a BoE rate hike later in the year.

Attempts by the Pound to recover in the latter half of the week then proved short-lived, with GBP exchange rates being undermined by a sharp contraction in retail sales, and struggling to benefit from positive PMIs.

The Australian dollar (AUD) got off to a positive start last week, with the currency benefitting from positive risk flows and a surprise improvement in domestic consumer confidence.

The 'Aussie' then faced notable headwinds in the middle of the week, initially giving up ground in response to weak domestic wage data.

The AUD selloff then gathered pace with the publication of Australia's latest jobs report as a shock contraction in the labour market last month tempered bets for another Reserve Bank of Australia (RBA) interest rate hike later in the year.

However, the Australian Dollar was then about to bounce back again at the very end of the week as widespread weakness in the US Dollar helped to bolster market risk appetite.

Near-Term GBP/AUD Forecast: Hawkish RBA Minutes to Lift the 'Aussie'? Looking to the week ahead, a quiet data calendar will see the minutes from the RBA's latest policy meeting act as the main catalyst of movement for the Pound to Australian Dollar exchange rate.

If the minutes strike a hawkish tone and signal that policymakers are likely to support further tightening, it could help to revive RBA rate hike bets and lift the 'Aussie'.

Meanwhile, UK economic releases are in short supply this week, likely leaving movement in the Pound to be dictated by wider market trends.

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

The Pound-Australian Dollar could recover if UK inflation revives BoE rate hike bets, while softer Australian wage growth may weigh on the Aussie. The Pound to Australian Dollar (GBP/AUD) exchange rate was subdued on Tuesday as markets digested the UK's latest employment figures.

At the time of writing, GBP/AUD was trading at AU$1.9045. Down slightly from the start of Tuesday’s opening levels.

Latest — Exchange Rates:
Pound to Australian Dollar (GBP/AUD): 1.9045 (-0.05%)

DAILY RECAP:

The Pound (GBP) faced headwinds on Tuesday, as the UK's latest jobs report raised concerns over the strength of the UK labour market.

According to data published by the Office for National Statistics (ONS), the UK's unemployment rate held at 4.9% in June, above forecasts it would drop to 4.8% as the UK economy added almost half the number jobs added in May.

The accompanying wage growth figures also sapped Sterling sentiment as average earnings slowed from 4.4% to 4.1%.

The soft employment data, particularly the slowdown in wage growth, came as a disappointment to GBP investors as it underpins expectations the Bank of England’s (BoE) may sit out the current hiking cycle.

The Australian Dollar (AUD) fluctuated on Tuesday, amid shifting risk sentiment and upbeat domestic data.

AUD exchange rates initially firmed through Tuesday’s Asian trading session, after Australian consumer confidence improved more than expected this month and even stuck its highest level since March.

However, the 'Aussie' was forced to relinquish the bulk of these gains by the start of the European session, with the high-yield currency struggling to sustain its support as rising energy prices and geopolitical uncertainty sapped market risk sentiment.

Near-Term GBP/AUD Forecast: Rising Inflation to Revive Sterling? Looking ahead to the middle of the week, the Pound Australian Dollar exchange rate may catch bids with the release of the UK's consumer price index.

July's CPI figures are forecast to report inflationary pressures began to build again in July, after previously easing for three consecutive months.

This could push Sterling higher if it keeps hopes alive for a BoE rate hike before the end of 2026.

In the meantime, the release of Australia's latest wage price index could dent the 'Aussie' if a moderation of wage growth in the second quarter is seen as weakening the case for further interest rate hikes from the Reserve Bank of Australia (RBA).

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

Pound-Australian Dollar can hold a firm tone if risk appetite stays fragile, although hawkish RBA rhetoric could limit any move back above AU$1.91. The Pound to Australian Dollar (GBP/AUD) exchange rate edged higher on Thursday as a risk-off market mood weighed on the ‘Aussie’, while the latest UK GDP figures left Sterling broadly steady.

At the time of writing, GBP/AUD was trading around AU$1.9123, marginally higher on the day.

Latest — Exchange Rates:

Pound to Australian Dollar (GBP/AUD): 1.910309 (-0.03%)

Pound to Dollar (GBP/USD): 1.348536 (-0.09%)

DAILY RECAP:

The Pound (GBP) was relatively muted on Thursday, although it managed to hold an advantage against weaker rivals after the UK’s latest GDP figures met expectations.

Data from the Office for National Statistics showed the UK economy expanded by 0.4% in the second quarter, down from 0.6% in the first quarter but still a respectable pace of growth.

Sterling drew only limited support from the release as the figures matched forecasts and some of the strength was linked to temporary and seasonal factors. The World Cup and warm summer weather helped lift activity in June.

There was also some caution over the outlook for the second half of the year. A number of economists warned that growth could slow if elevated energy prices and Middle East tensions keep inflation pressures high.

Meanwhile, the Australian Dollar (AUD) softened as a cautious market mood undermined demand for the risk-sensitive currency.

Investor sentiment remained fragile as tensions in the Middle East continued to simmer. Iran’s insistence that vessels require its permission to pass through the Strait of Hormuz, alongside threats to prolong the conflict with the US, kept markets on edge.

With hopes for a ceasefire and a full reopening of shipping routes fading, investors remained wary of holding higher-risk assets, leaving the ‘Aussie’ under pressure.

Near-Term GBP/AUD Forecast: Can Bullock’s comments steady the Australian Dollar? Looking ahead, a speech from Reserve Bank of Australia Governor Michele Bullock could influence the Australian Dollar during Friday’s Asian session.

Bullock struck a relatively hawkish tone after the RBA left interest rates on hold earlier this week. If she repeats that message, the ‘Aussie’ could find support and limit GBP/AUD upside.

For Sterling, UK data is thin on the ground, which may leave the Pound trading without a strong independent driver.

That means wider risk sentiment could remain the main influence on the pairing. If Middle East tensions continue to sap confidence, GBP/AUD may stay supported. A brighter market mood, however, could help the Australian Dollar recover.

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

Softer inflation lowers urgency for immediate RBA hike Markets still favour one more hike this cycle Renewed energy price strength delivers Aussie terms-of-trade tailwind EUR/AUD and GBP/AUD trade setups in focus A likely hawkish hold from the RBA and renewed geopolitical tensions in the Gulf driving energy prices higher have swung the fundamental backdrop in favour of the Aussie relative to the European crosses. 

Inflation undershoots, unemployment overshoots The RBA clearly thought there was more momentum in the economy in May than what eventually showed up in the data. It overestimated the inflationary pulse and underestimated the increase in unemployment, with both headline and trimmed mean inflation undershooting its May forecasts while unemployment overshot.

Source: FOREX.com

At face value, that suggests the path towards getting inflation back to acceptable levels may be a little more advanced than the Bank thought three months ago. But inflation is still too high, which is why the risk of another hike has not been completely snuffed out.

Markets push tightening risk further out

Source: TradingView, FOREX.com

While there is little probability attached to a hike today, making this meeting look very much like a placeholder with a hawkish hold, go further out the curve and the risk of tightening is still there. By November, when the next set of forecasts after today will be released, markets are basically at a coin flip on another hike. That lifts to 82% by February next year.

So while the amount of tightening priced by traders has been pared back relative to what underpinned the RBA’s May forecasts, the market still thinks there is a decent chance the Bank will need to go again this cycle.

Source: FOREX.com

The question is what that means for the RBA’s updated forecasts for GDP growth, unemployment and inflation released today. My suspicion is that the slight unwind in hawkish pricing will not have a particularly meaningful impact, with outcomes similar to those forecast in May. 

Source: FOREX.com

Spending resilience meets housing weakness One area where the Bank’s language may be upgraded is household spending. At the June meeting, the RBA said it was “slowing as expected”, but recent data has been quite strong, particularly in discretionary areas, questioning whether that view is still warranted.

However, that potential upgrade could be offset by the housing market, where the decline in house prices has accelerated and broadened since the Bank met six weeks ago. What had been weakness in some capital cities is now more widespread, potentially becoming a larger drag on household demand.

Given the data trend and potential statement tweaks, it’s very likely the RBA will retain the guidance used in July that it “will do what it considers necessary to achieve that outcome, including increasing the cash rate target further if required.” That basically gives the Bank room to sit comfortably for now while keeping the tightening option firmly on the table.

Terms of trade tailwinds favour the Aussie When it’s all said and done, I expect the RBA will be aiming to keep market pricing relatively unchanged, avoiding an unnecessary loosening in financial conditions that would make the task of reducing inflationary pressures more difficult. That points to the Aussie dollar continuing to be underpinned by hawkish rate expectations.

And when it comes to the European crosses, the Aussie also has the advantage of being a major energy exporter, meaning higher energy prices due to ongoing geopolitical tensions in the Gulf deliver a positive terms-of-trade shock, the exact opposite of what we see in Europe. When you throw energy insecurity into the mix, it points to tailwinds building for the Aussie relative to the European crosses.

EUR/AUD bears eye 1.6340 break

Source: TradingView

EUR/AUD looks heavy on the charts, sitting just above support at 1.6340. If the pair breaks beneath 1.6340 support and holds there, shorts could be set with a tight stop above the level for protection, targeting 1.6260, where the pair bottomed in July. Beyond that, a break of 1.6260 would open the door for a retest of 1.6130, where the price has bottomed and bounced on multiple occasions going back several years.

The message from the oscillators at this point is neutral. RSI (14) has been setting sequentially lower highs and now sits marginally below the neutral 50 level. MACD has also turned negative and is on the cusp of a bearish crossover. But neither indicator is providing a strong steer, placing more emphasis on price action.

GBP/AUD squeeze risk builds near 1.9150

Source: TradingView

While the fundamental backdrop favours downside for GBP/AUD, the price action warns of a potential squeeze and near-term topside break ahead of the RBA. The level in focus today is 1.9150, which has repeatedly acted as support and resistance in recent weeks. The pair is now squeezing up against that level while remaining within the broader uptrend running from the low set in late May.

With an engulfing candle printing on Monday, a clean break above 1.9150 could put the August 3 high at 1.9260 in play. Beyond that, resistance sits at 1.9350, with the 200-day simple moving average around 1.9370 and the March swing high at 1.9400 just above. If the pair breaks cleanly above 1.9150, longs could be set with a tight stop beneath the level for protection, targeting those upside levels.

Alternatively, if 1.9150 continues to cap gains, as has been the case over recent sessions, shorts could be set with a tight stop above the level, targeting a retest of the May uptrend, followed by 1.9004, the swing low set on July 28. Beyond that, 1.8945 comes into focus, having acted as resistance earlier this year.

Mirroring EUR/AUD, the oscillators are neutral for GBP/AUD. RSI (14) sits just above 50, while MACD is running parallel to the signal line around breakeven, placing more emphasis on price action for guidance.

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.

The Pound to Australian Dollar (GBP/AUD) exchange rate fell to its weakest level since late June last week as stronger Australian economic data reinforced expectations for further Reserve Bank of Australia interest rate hikes.

At the time of writing, GBP/AUD was trading around AU$1.9073, down approximately 1% over the week.

Latest — Exchange Rates:

Pound to Australian Dollar (GBP/AUD): 1.90626 (-0.10%)

Pound to Dollar (GBP/USD): 1.335557 (+0.23%)

DAILY RECAP:

The Australian Dollar (AUD) proved remarkably resilient last week, with the risk-sensitive currency defying the broader deterioration in market sentiment linked to renewed conflict in the Middle East.

While risk appetite weakened during the second half of the week as geopolitical tensions intensified and oil prices climbed, the ‘Aussie’ avoided a sharper sell-off thanks to stronger domestic economic data.

AUD investors were particularly encouraged by Australia's latest employment report, which showed the economy created more than 76,000 jobs in June.

Together with stronger-than-expected July PMI readings, the figures reinforced expectations for further Reserve Bank of Australia (RBA) interest rate hikes and helped the Australian Dollar end the week firmly higher.

Meanwhile, the Pound (GBP) struggled to attract sustained support as rising UK government borrowing costs unsettled investors.

Although higher global energy prices contributed to the rise in gilt yields, markets also focused on Prime Minister Andy Burnham's first wave of cost-of-living measures.

The removal of VAT on domestic electricity bills and tax relief for hospitality businesses raised fresh questions over how the government intends to finance the measures while remaining within Labour's fiscal rules.

A busy week of UK economic data provided only mixed support for Sterling. Strong employment and retail sales figures were offset by softer inflation, which kept expectations for further Bank of England (BoE) interest rate hikes in check.

Near-Term GBP/AUD Forecast: Cautious BoE to Sap Sterling Sentiment? Looking ahead, the Bank of England's latest interest rate decision is expected to be the main driver of the Pound to Australian Dollar exchange rate this week.

Markets widely expect policymakers to leave interest rates unchanged, placing the emphasis on the Bank's forward guidance.

Sterling could come under renewed pressure if the BoE continues to emphasise downside risks to growth and maintains a cautious policy outlook.

However, if policymakers acknowledge that rising energy prices have increased inflation risks and leave the door open to further tightening, the Pound may stage a recovery.

For the Australian Dollar, attention will focus on Australia's quarterly inflation report. A stronger-than-expected rise in consumer prices would reinforce expectations for further RBA interest rate hikes and could provide additional support for the ‘Aussie’.

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.

The Pound to Australian Dollar (GBP/AUD) exchange rate briefly climbed to a one-week high on Thursday before easing back as investors locked in profits following Sterling's recent rally.

At the time of writing, GBP/AUD was trading at AU$1.9294, having retreated from an earlier high of AU$1.9353.

Latest — Exchange Rates:
Pound to Australian Dollar (GBP/AUD): 1.926352 (-0.27%)
Pound to Dollar (GBP/USD): 1.347811 (-0.45%)
Australian Dollar to Dollar (AUD/USD): 0.69967 (-0.19%)

DAILY RECAP:

The Australian Dollar (AUD) softened during Thursday’s Asian trading session as markets reacted to new data.

Australian consumer inflation expectations unexpectedly eased from 5.5% in June to 4.7% in July, the lowest reading since January.

The latest figures slightly dampened Reserve Bank of Australia (RBA) interest rate hike expectations, although the impact was limited.

This allowed AUD to recoup some losses as European trade began.

Meanwhile, the Pound (GBP) trended slightly lower on Thursday, with GBP surrendering some of Wednesday’s impressive gains.

Sterling had rallied in the middle of the week following reports that Shabana Mahmood is now the frontrunner for Chancellor in incoming Prime Minister Andy Burnham’s cabinet, rather than Ed Miliband.

Miliband had been the favourite to enter Number 11, but there were concerns among investors that the soft-left MP would pursue less orthodox fiscal policy. Mahmood is seen as more market-friendly, with City figures welcoming reports that she could be Burnham’s choice.

However, the Pound couldn’t sustain its gains into Thursday, even with UK GDP printing as forecast to show a 0.1% recovery in May.

Following Wednesday’s gains, Sterling seemed to suffer some profit-taking.

Near-Term GBP/AUD Forecast: Wider Trends to Drive the Pairing Looking ahead, economic data is thin on the ground for both the Pound and the Australian Dollar on Friday, likely leaving the pairing to trade on wider market trends.

Sterling may draw support as Andy Burnham is formally declared Labour leader, paving the way for him to enter Number 10 on Monday, if investors continue to feel more certain about the future of UK politics.

Meanwhile, market risk dynamics may drive the risk-sensitive ‘Aussie’. Events in the Middle East could be key, although the recent escalation in tensions has had a muted impact on the market mood so far.

The Pound to Australian Dollar (GBP/AUD) exchange rate edged lower on Tuesday as stronger Australian confidence data and robust Chinese trade figures supported the ‘Aussie’.

At the time of writing, GBP/AUD was trading at AU$1.9254, down around 0.2% on the day.

Latest — Exchange Rates:
Pound to Australian Dollar (GBP/AUD): 1.9273 (-0.11%)
Pound to Dollar (GBP/USD): 1.338663 (+0.28%)
Australian Dollar to Dollar (AUD/USD): 0.69458 (+0.39%)

DAILY RECAP:

The Australian Dollar (AUD) strengthened on Tuesday, supported by an improvement in domestic sentiment.

Australia’s latest consumer and business confidence indexes outperformed expectations in July and June, respectively.

This improvement was attributed to easing concerns over energy costs, interest rates and the labour market.

At the same time, demand for the ‘Aussie’ was also bolstered by some spectacular trade figures from its largest trading partner, China.

China recorded its second-largest trade surplus on record in June, with markets particularly impressed by the 36% surge in imports to an all-time high of $286.76bn.

The spike was welcomed by AUD investors as Australian exports are likely to have seen a bump amid the jump in demand.

Meanwhile, while placed on the defensive against the Australian Dollar, the Pound (GBP) traded positively against most of its other peers on Tuesday amid renewed expectations for a Bank of England (BoE) interest rate hike.

Bets for a rate hike before the end of 2026 have risen amid the fresh rise in energy prices as the resumption of hostilities in the Gulf has closed the Strait of Hormuz again.

However, the Pound’s upside potential was simultaneously capped by remarks from BoE Governor Andrew Bailey.

Speaking to the Treasury Select Committee, Bailey warned of potential instability stemming from the conflict as well as flagging the UK’s slow growth as a major risk to the economy.

Near-Term GBP/AUD Forecast: Slowing Chinese GDP to Drag on the ‘Aussie’? Looking ahead to the middle of the week, the publication of China’s latest GDP figures could influence the Pound to Australian Dollar exchange rate.

The ‘Aussie’ may face headwinds as consensus estimates predict Chinese economic growth will have cooled in the second quarter.

Meanwhile, notable UK economic releases are in short supply on Wednesday, which may leave movement in Sterling to be dictated by wider market trends.

The Pound to Australian Dollar (GBP/AUD) exchange rate opens the new week around 1.9271 after holding close to five-month highs, with Sterling remaining well supported while the Australian Dollar faces another busy week of domestic data and renewed scrutiny over China's economic outlook.

Latest — Exchange Rates:
Pound to Australian Dollar (GBP/AUD): 1.927065 (-0.05%)
Pound to Dollar (GBP/USD): 1.339 (-0.12%)
Australian Dollar to Dollar (AUD/USD): 0.694839 (-0.07%)

WEEKLY RECAP:

GBP/AUD spent much of last week consolidating just below the 1.93 level after a strong rally through June.

The Pound continued to outperform despite evidence that the UK economy is slowing.

Markets remain reluctant to price aggressive Bank of England easing while inflation stays above target, helping Sterling retain a yield advantage over several major currencies.

In its latest monthly outlook, MUFG said the Pound was among the strongest-performing G10 currencies through June, supported by resilient investor confidence and the fading inflation shock as oil prices retreated.

The Australian Dollar struggled to generate sustained demand.

Although global risk sentiment has improved following the easing of Middle East tensions, investors remain cautious over China's economic outlook, a key driver for Australian exports.

Reuters has reported that attention is now turning to China's second-quarter GDP and June activity data, with markets expecting slower growth after softer domestic demand and weaker investment. Those figures are likely to have an important bearing on the Australian Dollar this week.

In a recent client note, ING highlighted that Sterling is increasingly being driven by domestic developments, while commodity-linked currencies remain more exposed to changes in global growth expectations.

Near-Term GBP/AUD Forecast: China GDP and UK GDP in Focus For Pound Sterling, investors will watch Thursday's monthly UK GDP estimate for May, together with industrial production and trade balance figures. Stronger-than-expected data would reinforce the view that the UK economy has remained resilient despite softer business surveys.

For the Australian Dollar, the spotlight falls on China's second-quarter GDP, June retail sales and industrial production, all due on Wednesday. Stronger Chinese data would likely support the Australian Dollar by improving confidence in Australia's export outlook, while weaker figures could renew pressure on the currency.

Markets will also continue to monitor developments in commodity markets following the recent decline in oil prices and any fresh guidance from Reserve Bank of Australia officials after last week's policy decision.

If UK GDP surprises to the upside while Chinese growth data disappoints, GBP/AUD could retest resistance around 1.94.

However, stronger Chinese activity data and firmer commodity prices could allow the Australian Dollar to recover, pulling the pair back towards 1.90.