The current market bias for GBP to AUD suggests a bearish sentiment.
Key drivers influencing this trend include:
- Interest rate differential: The Bank of England (BoE) is projected to reduce rates to 3.25% as inflation slows, contrasting with the Reserve Bank of Australia (RBA), which may raise rates to 3.85% amid rising inflation.
- Economic growth and inflation trends: The UK economy is expected to grow at a slower pace of 1.2% with inflation declining, while the Australian economy is showing signs of resilience which supports the AUD.
In the near term, the GBP to AUD exchange rate is likely to trade within a range, reflecting current levels.
An upside risk could come from unexpected positive UK economic data that strengthens the GBP. Conversely, a downside risk could stem from further RBA rate hikes that amplify AUD strength, pushing the GBP lower.