The Pound to Australian Dollar (GBP/AUD) exchange rate struck its worst levels since mid-2024 last week, amid increasingly hawkish Reserve Bank of Australia (RBA) interest rate expectations.
Pound to Australian Dollar (GBP/AUD): 1.89548
Pound to Dollar (GBP/USD): 1.34872
Australian Dollar to Dollar (AUD/USD): 0.71155
DAILY RECAP:
The Australian Dollar (AUD) strengthened through last week’s session, with the bulk of its support stemming from the release of Australia’s latest consumer price index.
According to data published by the Australian Bureau of Statistics (ABS), inflation held at 3.8% in January against forecasts that it would cool to 3.7%, with trimmed mean CPI unexpectedly rising to 3.4% over the same period.
The stronger-than-forecast inflation reading triggered an even more hawkish repricing of RBA interest rate expectations, with AUD investors predicting the bank will deliver another 25bps interest rate hike in May.
The ‘Aussie’ then attracted additional support at the end of the week amid a positive shift in market risk appetite.
The Pound (GBP) faced notable headwinds over the past week, with investor appetite for the currency being dampened by fresh UK political jitters.
GBP investors were cautious ahead of a closely watched by-election in the Gorton and Denton constituency in Greater Manchester, which saw the Green Party storm to victory, leaving Labour to finish third place in a seat it held with a 13,000 majority in 2024.
The result has fuelled speculation over Prime Minister Keir Starmer’s leadership and the government’s broader electoral standing, with GBP investors fearing it may further embolden his critics within the Labour Party to launch a leadership challenge later in the year.
However, one bright point for the Pound last week were comments from Bank of England (BoE) Governor Andrew Bailey, who claimed that the bank’s decision in March ‘genuinely remains an open question’.
Near-Term GBP/AUD Forecast: Australian GDP in Focus
Turning to this week’s session, the Pound to Australian Dollar exchange rate may remain under pressure with the publication of Australia’s latest GDP figures.
Analysts are forecasting a healthy acceleration of growth in the last quarter of 2025, which will no doubt bolster bets for more RBA rate hikes this year.
In the meantime, the focus for GBP investors will be on Chancellor Rachel Reeves’s Spring Statement.
While Reeves is unlikely to announce any major policies at what she seeks to be a ‘low-key’ fiscal event, the accompanying forecasts from the Office for Budgetary Responsibility (OBR) may offer direction to the Pound.
If they paint a more upbeat economic outlook for the UK, Sterling is likely to strengthen.
