The GBP to AUD exchange rate currently leans bearish, driven by key monetary policy shifts and economic data. The interest rate differential is narrowing, as the Bank of England is expected to lower rates while the Reserve Bank of Australia may raise them in early 2026. This divergence could diminish the appeal of the pound compared to the Aussie.
Recent UK retail sales data is critical; if it shows improvement, it may provide some support for the pound. However, the outlook for the UK economy, particularly slower growth and inflation trends, could put further pressure on the GBP.
In the near term, the exchange rate might trade within a stable range, reflecting the recent price action. Upside risk includes potential stronger-than-expected retail sales boosting GBP, while a downside risk arises from persistent inflation in Australia, prompting a quicker RBA rate increase.