Pound-to-Australian Dollar Forecast: GBP Hits Ten-Week High As Aussie Inflation Slows

The Pound to Australian Dollar (GBP/AUD) exchange rate strengthened on Wednesday, touching a ten-week high as softer Australian inflation data and a cautious market mood weighed on the risk-sensitive Australian Dollar.

At the time of writing, GBP/AUD was trading at AU$1.9129, up around 0.2% on the day.

DAILY RECAP:

The Australian Dollar (AUD) remained under pressure after the latest inflation figures failed to revive expectations for further Reserve Bank of Australia policy tightening.

Data showed headline inflation unexpectedly eased from 4.2% to 4.0% in May, disappointing forecasts for a rise to 4.4%.

While the trimmed mean inflation measure rose more than expected, investors focused on the broader slowdown in headline price growth, limiting support for the ‘Aussie’.

The Australian Dollar was also undermined by a more cautious mood across global markets.

Concerns surrounding elevated valuations in the technology sector and fears that rising borrowing costs could expose weaknesses in AI-related investment spending contributed to a broad retreat in risk appetite.

This risk-off environment weighed particularly heavily on higher-risk currencies such as the Australian Dollar.

Meanwhile, the Pound (GBP) edged higher despite the absence of major UK economic releases.

Sterling benefited from signs that political uncertainty is beginning to ease following Prime Minister Keir Starmer’s resignation.

Markets increasingly expect Andy Burnham to become the next Prime Minister without facing a prolonged leadership contest, reducing concerns about a drawn-out period of political instability.

The prospect of an orderly transition helped improve sentiment towards UK assets and offered modest support to the Pound.

Near-Term GBP/AUD Forecast: Australian Jobs Data in Focus

Attention now turns to Australia’s latest labour market report.

Economists expect unemployment to fall from 4.4% to 4.3%, supported by a solid increase in employment during June.

A stronger-than-expected jobs report could provide support for the Australian Dollar by reinforcing confidence in the resilience of the labour market.

For Sterling, the Confederation of British Industry’s latest distributive trades survey may attract some attention.

However, unless the figures show a substantial improvement in business conditions, the impact on the Pound is likely to be limited.

Broader market sentiment may remain the dominant driver of GBP/AUD.

Investors will also closely monitor the latest US core PCE inflation figures. A stronger reading could reinforce expectations for tighter Federal Reserve policy, potentially weighing on risk appetite and creating further headwinds for the Australian Dollar.