Key Moments
- GBP/AUD briefly fell to a 15-month low near 1.9175 before recovering to around 1.9250 as immediate UK political concerns eased.
- Barclays forecasts additional medium-term weakness in GBP/AUD and sets a target level of 1.85.
- Barclays cites ongoing UK political risk, prospects of larger Bank of England rate cuts, and relatively supportive conditions for the Australian dollar as key drivers.
Recent GBP/AUD Price Action
The Pound to Australian dollar (GBP/AUD) exchange rate dropped to around 1.9175 earlier this week, marking a 15-month low, as market participants focused on rising UK political uncertainty. The pair later rebounded to approximately 1.9250 as some of the most acute political pressures appeared to subside.
Barclays Outlook and Target
Barclays projects that GBP/AUD will continue to weaken over the medium term. The bank has set a target for the exchange rate at 1.85, reflecting its expectation that political and interest-rate dynamics will weigh on the Pound relative to the Australian dollar.
| Metric | Level / View |
|---|---|
| Recent low in GBP/AUD | 1.9175 (15-month low) |
| Recent rebound level | 1.9250 |
| Barclays medium-term target | 1.85 |
UK Political Risk and Pound Risk Premium
According to the article, immediate fears about the UK political backdrop have moderated as Labour MPs have stepped back from pursuing an immediate effort to replace Prime Minister Starmer. Despite this, Barclays highlights that deeper political strains are likely to persist.
The bank points to a key by-election scheduled for February 26th and local elections in May as upcoming political events that could keep uncertainty elevated. In this environment, Barclays expects the risk premium attached to the Pound to remain high.
Bank of England Policy Considerations
Following what is described as a knife-edge policy decision by the Bank of England last week, Barclays underscores the possibility that interest-rate cuts could ultimately be larger than currently expected. The assessment becomes more pronounced if there is “a shift towards a more activist and dovish stance from Mann.”
In Barclays’ view, the prospect of more aggressive easing by the Bank of England is another factor that could undermine the Pound’s performance against the Australian dollar.
Supportive Backdrop for the Australian Dollar
On the Australian side of the cross, Barclays anticipates continued overall support stemming from firm commodity prices. The bank sees this as a positive influence for the Australian dollar relative to the Pound.
Role of Reserve Bank of Australia Policy
Monetary policy developments in Australia are also highlighted as an important driver for the currency pair. After the Reserve Bank of Australia’s rate hike in February, Barclays notes the possibility of further increases in interest rates. Such moves would, in the bank’s view, provide additional direct support for the Australian dollar.
Disclaimer
This article is for information purposes only and does not constitute investment advice, a personal recommendation, or an offer to buy or sell any financial instrument. It summarises research and views published by third-party banks, which remain their own and do not necessarily reflect our opinions. Neither we nor the originating bank accept liability for any reliance placed on this summary; readers should seek independent financial advice before making investment decisions.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
