– Written by
James Fuller
STORY LINK Pound to Australian Dollar Forecast: Strong Trade Data Supports Aussie
The Pound to Australian Dollar exchange rate (GBP/AUD) traded close to 1.9110 on Thursday, around 0.6% below last Friday’s close as stronger Australian economic data supported the Australian currency.
Pound Sterling received some protection from an improvement in UK construction activity, although banks remain cautious over the Pound’s interest-rate support ahead of next week’s Reserve Bank of Australia decision.
GBP/AUD Forecasts: Morgan Stanley targets 1.82
Morgan Stanley expects GBP/AUD to fall to 1.82 over the coming months, almost 5% below current levels, as its contrasting views on the two currencies favour further Australian Dollar gains.
According to Morgan Stanley; “We are bearish GBP.”
It added; “We remain bullish on AUD.”
GBP/AUD ended last week around 1.9220 before falling back towards 1.91, leaving the important 1.9000 level within relatively close reach.
Morgan Stanley considers recent Sterling optimism largely priced in and expects UK fiscal uncertainty to return ahead of the autumn Budget.
The bank commented; “GBP/AUD faces downward pressure from elevated risk appetite and a potential increase in GBP negative risk premium.”
The Australian Dollar received further support after Australia unexpectedly returned to a A$1.93bn goods trade surplus in June.
Markets had expected a deficit of around A$1.1bn following May’s revised A$2.37bn shortfall.
Exports surged 9.6%, helped by stronger gold and mineral shipments, while imports declined by 0.2%.
Separate figures showed Australian household spending increased 0.8% in June, four times the expected 0.2% increase.
The stronger data have helped the Aussie despite a sharp reduction in expectations that the Reserve Bank of Australia will raise interest rates again.
Westpac commented; “We no longer expect rate hikes by the RBA this year.”
The bank expects the cash rate to remain at 4.35% throughout 2026 after second-quarter underlying inflation proved softer than anticipated.
Nevertheless, Westpac has retained a constructive Australian Dollar outlook.
It added; “Impact on the exchange rate outlook from our change in view is not material.”
Westpac forecasts AUD/USD at 0.71 in September, 0.72 at the end of 2026 and 0.73 by June 2027.
Goldman Sachs has also abandoned its call for another RBA increase and expects rates to remain unchanged through the remainder of this year.
According to Goldman; “Today’s material downside surprise relative to expectations shifts the balance of risks towards the RBA remaining on hold.”
The RBA will announce its latest monetary-policy decision next Tuesday, with its updated assessment of inflation likely to be more important for the Australian Dollar than an unchanged rate decision.
Sterling’s interest-rate support is also facing scrutiny.
The UK construction PMI recovered from 38.4 to 44.7 in July, but remained below the 50 threshold and confirmed a seventh successive month of contraction.
MUFG believes markets have priced too much further Bank of England tightening.
The bank warned; “If there is de-escalation and a decline in upside inflation risks, UK yields should fall and take the Pound lower.”
Friday’s Chinese trade figures will provide the next immediate test for the Australian Dollar.
Strong Chinese data and sustained risk appetite could push GBP/AUD below 1.9000, strengthening the case for Morgan Stanley’s 1.82 target.
Weak Chinese releases, renewed geopolitical tensions or a surprisingly dovish RBA message could instead lift the pair towards 1.9200, although the medium-term bank outlook remains tilted towards Australian Dollar strength.
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