Pound to Australian Dollar Week Ahead Forecast: Still Vulnerable, But Looking Better Supported

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The Pound to Australian Dollar (GBPAUD) exchange rate has been under pressure this year, but the selloff is starting to look mature and we think Sterling can be better supported from here.

The pullback in GBPAUD now takes it to 1.9632, making for a 3.32% retracement from the multi-year highs at 2.260, achieved in December.

GBPAUD has been in a longer-term trend of appreciation, but the trend has tended to be punctuated by deep drawdowns, each exceeding 3% in scope.

Above: GBPAUD at daily intervals, with the scope of typical drawdowns highlighted.

So, from this perspective, GBPAUD is merely retracing within the context of that uptrend. The implication is that at some point in the coming weeks, the exchange rate can start rising again, with the outcome being fresh highs above 2.2600.

Note that GBPAUD trades above the 200-day exponential moving average (EMA) at 1.9513. Previous pullbacks have tended to test this level, which suggests there is still some scope for near-term weakness over the course of the next few days and maybe even the next two weeks.

Ultimately, though, as long as GBPAUD remains above the 200 EMA it is in an uptrend. If we get a clear indication that it has broken below this technical level, then we reassess the bigger setup and start advocating for a multi-week trend of weakness to ensue.

Why are we not advocating a stronger bounce in the Pound at this stage? The answer lies with this week's UK job report which looks to be a sizeable risk for the UK currency.

The consensus looks for the unemployment rate to edge up to 4.4% from 4.3% in light of survey evidence of growing job losses and a slowdown in hiring intentions. In particular, the PMI surveys have been warning of a deterioration in the labour market for a couple of months now.

"Employment indicators are pointing firmly to a decline in payrolled employment in the coming months," says Sam Hill, Head of Market Insights at Lloyds Bank.

The Pound is likely to fall should unemployment rise faster than was expected and the opposite reaction is likely if the data proves stronger than expected.

GBP/AUD investment bank consensus forecast for 2025. See the median, mean, highest and lowest targets, giving a highly accurate forecasting resource. Request your copy now.

The Bank of England is watching employment and wage dynamics, judging that high wages are inflationary and must be met with higher-for-longer interest rates.

However, rising unemployment will suggest to the Bank that wage pressures will fall notably in the coming months, which will allow them to cut interest rates further.

Money market pricing shows investors have raised bets for more rate cuts from the Bank of England this year, which has contributed to the weaker Pound. However, the market is still only expecting two rate cuts, with a third being a possibility.

For the Pound, rising expectations for rate cuts will result in weakness and this is why we forecast GBP downside in the coming days, judging that the process has further to run.

Above: Markets see more rate cuts ahead than was the case just one week ago, and there is scope for this trend to continue.

There are no important events scheduled for Australia or China this week, which means AUD will be subject to broader global FX market trends.

The inauguration of U.S. President Donald Trump forms the major event risk for global sentiment in the coming days. The general theme will be that the AUD will rally if markets like what Trump does, which would put GBPAUD under further pressure.

However, predicting how events in the coming days will pan out is nigh on impossible as we simply don't know what Trump has up his sleeve.

What we do know is that Trump will announce significant day-one policy changes that could have market implications. This will be followed up with further decisions throughout the course of the week.

GBP/AUD investment bank consensus forecast for 2025. See the median, mean, highest and lowest targets, giving a highly accurate forecasting resource. Request your copy now.

The big one for global FX is what he does with tariffs: any move towards a blanket tariff for all U.S. imports would boost the Dollar and weigh on the Aussie Dollar more broadly. This is because such a universal tariff is inflationary for the U.S., which will prompt the Federal Reserve to keep interest rates unchanged for much longer.

This would weigh on global market sentiment, to which AUD is highly sensitive.

Should Trump adopt a more nuanced and transactional approach to tariffs, then relief can set in as this is tantamount to watering down his tariff plans. Here, AUD would rise.

Trump on Sunday night promised a blitz of executive action on his first day, including sweeping repeals of Biden administration policies, and said his followers would "have a lot of fun" watching him do so.

"Every radical and foolish executive order of the Biden administration will be repealed within hours of when I take the oath of office," he said.

"Somebody said yesterday, 'Sir, don’t sign so many in one day. Let’s do it over a period of weeks.' I said, 'Like hell we're going to do it over weeks.’' We’re going to sign them at the beginning," Trump told supporters on the eve of the inauguration.

Whether tariffs will form part of his early agenda remains to be seen, but markets think there is an above 50% chance of the issue being addressed at some point this week.