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.
