Pound-to-Australian Dollar Week Ahead Forecast: Entrenched Selloff, CPI Data Risks

🎯 GBP/AUD year-ahead forecast: Consensus targets from our survey of over 30 investment bank projections. Request your copy.

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Fresh lows await the pound against the Australian dollar, but Tuesday's Aussie inflation print can stem the losses.

The pound to Australian dollar exchange rate (GBP/AUD) trades at 1.9066 on Monday, not far from last week's 7-month low at 1.9025, as a forceful selloff remains intact.

AUD gains are widespread and reflect the currency's outperformance in 2026, while GBP is still smarting from last week's bruising selloff.

The GBP/AUD decline of 2026 perfectly encapsulates the divergent direction of travel for UK and Australian interest rates: The Reserve Bank of Australia has resumed a rate hiking cycle, while the Bank of England has further to cut.

In fact, Australian assets are amongst the most attractive on a relative basis, and research shows this is driving demand for AUD.

"AUD is uniquely positioned with a hiking cycle underway, and net portfolio flows supported by strong fiscal metrics and changing FX hedging behaviour," says JP Morgan in a recent analysis.

Analysts at BNY Mellon say their internal flow data indicate that weekly flows into Australia’s interest rate-sensitive segment – cash and short-term instruments – have reached magnitudes typically associated with event risk or structural re-pricing, suggesting investors are actively reallocating capital toward Australian short-duration assets.

"FX markets are showing little reluctance to price in policy pivots where justified by inflation. Flows are even more forceful when hawkish expectations are endorsed by the relevant policymakers. Presently, Australia is the clearest case of G10 tightening," says Geoff Yu, EMEA Macro Strategist at BNY Markets.

From a technical perspective, GBP/AUD is in oversold territory with the Relative Strength Index (RSI) at 27.78 (see lower panel in chart:)

Anything below 30 represents oversold, and technical lore has it that the exchange rate should ultimately correct higher to overcome these oversold conditions.

Yet, the pair has been in oversold territory since January!

This tells us that this is a very assertive selloff and we're loath to stand in its way, and on this basis alone, we favour fresh lows in the coming days.

Keep an eye on Australian CPI inflation overnight, as any below consensus reading would be jumped on by a market that could be ready to book profit on the AUD's advance.

"A very large (and growing) net AUD long position makes January CPI data, due to be released overnight, important. The market expects a steady trimmed mean rate at 3.3% y/y, and RBA Governor Bullock will have a chance to comment at a ‘Fireside Chat’ shortly after the London open," says Kit Juckes, lead FX analyst at Société Générale.

Any surprises in the data could well help GBP/AUD stabilise and catch its breath before resuming lower.

🎯 GBP/AUD year-ahead forecast: Consensus targets from our survey of over 30 investment bank projections. Request your copy.