Pound-to-Australian Dollar Week Ahead Forecast: Locked in a Downmove
by Gary Howes · The Pound Sterling LiveThe Pound is in a technical short-term downmove against the Australian Dollar.
The new week starts with the Pound to Australian Dollar exchange rate (GBP/AUD) running a sizeable day-on-day loss, trading 0.40% lower at the time of writing at 2.0520.
The decline represents the latest leg in a selloff that has been in place since August 20, when the pair turned south, having peaked at 2.10.
The charts confirm GBP/AUD is now firmly in the clutches of a short-term downmove, trading below the nine-day exponential moving average (EMA) at 2.0618, which leaves our Week Ahead Forecast model advocating for further downside.
Get More From Your GBP/AUD Transfer
Pound Sterling Live consistently delivers stronger rates than major UK banks. In July, you could have saved up to A$2,135 on a £50,000 transfer thanks to our competitive pricing.
i - Based on average GBP/AUD rate observed in July.
Because we think the trend is likely to extend further, targets at 2.0485 and then 2.0426 are now achievable. (AUD buyers could consider locking in current levels to protect against further downside, while GBP buyers should set orders to automatically transact at better levels, learn more).
Although GBP/AUD looks to be trending lower, we note that the Monday selloff takes GBP/AUD quite a way from the nine-day EMA, which suggests some immediate-term oversold conditions that could allow for a mean reversion back towards the nine-day EMA in the coming hours and one-to-two days.
This mean reverting tendency in G10 exchange rates forms a crucial component of our Week Ahead Forecast model that proves highly competent in predicting near-term price action.
But the key takeaway is that any GBP/AUD upside looks likely to be limited in nature, and we consider it will ultimately give way to a test of the next targets to the downside.
Over a multi-week horizon, the next chart shows that there is solid support coming up soon, and although further weakness is possible, the coming weeks should see the selloff reach burnout levels:
AUD impetus comes from last week's strong domestic GDP report (+0.6% q/q), which showed the economy is growing at a clip again, helped by a recovery in consumer spending.
"The fact that household spending was the main driver of growth, up 0.9% and 2.0%yr, was perhaps the most encouraging revelation of the detail," says Elliot Clarke, Head of International Economics at Westpac.
This lessens the requirement for the Reserve Bank of Australia to cut interest rates much further, which is supporting short-term Aussie bond yields, translating into support for the currency.
Although the domestic picture is certainly supportive, it's the global one that is proving to be the main driver of AUD upside.
GBP/AUD Consensus Forecasts Lifted
The median and mean consensus forecast for GBP/AUD have risen.
- Make smarter timing decisions
- Get more AUD for your GBP
- Stay ahead of market moves
AUD/USD is moving higher again, and this is pulling up other AUD exchange rates, including AUD/GBP, suggesting that U.S. data will be important in determining direction in the coming days.
Gains leave AUD/USD eyeing new six–week highs amid expectations for generous Federal Reserve interest rate cuts. Last week's U.S. employment reports encouraged the market to anticipate as many as six cuts in the coming 18 months.
The train can keep on rolling this week if inflation data comes in below expectations. First up is Wednesday's Producer Price Index (PPI) inflation report, that gives an insight into how tariffs are affecting the country's production industries, which will ultimately pass costs onwards.
Last month's release impacted markets, and we think an overshoot on the 0.3% m/m expected by markets can weigh on risk assets, including the Aussie Dollar.
Likewise, an undershoot would propel the Aussie higher.
Thursday's CPI inflation report is the highlight of the week, and here markets look for headline inflation to rise to 2.9% y/y. The same rules apply: an above-consensus reading would weigh on the Aussie, while a below-consensus print would boost it and push GBP/AUD to those lower levels we are looking for.