AUD Rallies After Strong Jobs Report

The Pound to Australian Dollar (GBP/AUD) exchange rate plunged to its weakest levels in over a year last week as strong Australian data turbocharged Reserve Bank of Australia rate hike bets, leaving Sterling firmly on the back foot.

DAILY RECAP:

The Pound to Australian Dollar (GBP/AUD) exchange rate faced heavy selling pressure last week, with the pairing plummeting to its worst levels since the start of 2025.

At the time of writing, GBP/AUD was trading at AU$1.9736. Down around 1.4% from the start of last week’s session.

The Australian Dollar (AUD) was steady at the start of last week as upbeat trade figures from China helped to offset weak market risk appetite stemming from US President Donald Trump’s latest tariff threats.

The ‘Aussie’ began to catch bids in mid-week trade as widespread weakness in the US Dollar (USD), coupled with surging commodity prices, made the currency more attractive to investors.

AUD exchange rates were then propelled to multi-month highs as we entered the latter half of the week, with AUD investors cheering the release of stronger-than-expected domestic jobs and PMI data.

December’s bumper jobs report proved particularly strong support for the ‘Aussie’ as a surprise fall in unemployment fuelled Reserve Bank of Australia (RBA) interest rate hike expectations, with some AUD investors even betting on a potential hike following the bank’s first policy meeting of the year.

Trade in the Pound (GBP) was uneven last week, as GBP investors digested several high-impact UK economic releases.

Sterling was initially subdued after a mixed UK jobs report. While the data showed a sizeable number of jobs being added, the unemployment rate held at a multi-year high and stoked dovish Bank of England (BoE) rate bets.

GBP exchange rates then remained under pressure through the middle of the week, despite the UK’s consumer price index outpacing forecasts in December. While headline inflation beat forecasts, deeper analysis showed that underlying inflationary pressures continued to ease.

The Pound was then able to claw back some ground at the very end of the week, as data showed retail sales rebounded in December and the UK services sector expanded at its fastest pace in almost two years.

Near-Term GBP/AUD Forecast: Cooling Inflation to Sink the ‘Aussie’?

Looking to the week ahead, the main catalyst of movement in the Pound to Australian Dollar exchange rate is likely to be the publication of Australia’s own CPI figures.

Economists are predicting a moderation of inflationary pressures in December, with consensus estimates expecting inflation to fall back below 3%.

This could dent the recent hawkish narrative around the RBA, with the Australian Dollar poised to relinquish its recent gains if it causes AUD investors to push back their bets on when the bank’s hiking cycle may begin.

Meanwhile, with the UK’s economic calendar looking pretty sparse this week, any movement in the Pound is likely to be driven by wider market trends.