Australian Dollar a Buy vs. Pound says HSBC
- Written by: Gary Howes
Image © Pound Sterling Live
The pound-Australian dollar exchange rate is forecast to move higher this year.
Strategists at HSBC are tipping the pound to fall against the Australian dollar this year.
In fact, conviction in the move is elevated enough to make it a core trade idea on HSBC's currency desk for 2026.
In a year-ahead FX market note, HSBC's head of FX research, Paul Mackel, says "Sell GBP-AUD".
"Softness building in both the UK labour market and inflation data should erode the GBP’s interest rate buffer and we expect to see the currency weaken against the AUD where sticky core inflation is likely to keep the RBA hawkish," he explains.
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"Given the scale of recent AUD rate repricing, GBP rates are likely to be the main driver. But with the RBA’s stance matching hawkish market pricing, this is likely to keep a floor under the AUD."
Money markets show investors expect another rate cut from the Bank of England by April.
In contrast, the next move at the RBA in 2026 is expected to be a rate rise.
Image courtesy of Goldman Sachs.
This implies that interest rate-based returns in Australia should improve relative to those in the UK, which would theoretically draw capital towards the Aussie dollar at the expense of the pound.
HSBC is "optimistic on the AUD going into 2026. The key driver of the recent strength in the currency has been hotter-than-expected inflation prints including the newly introduced complete monthly CPI print."
Also, "the labour market is tight and has shown signs of softening, but this has been outweighed by the broad-based rise in inflationary pressure. The RBA has now seemingly abandoned its cutting cycle and the next move is likely upwards."
Elsewhere, Australian lender NAB is also constructive on the domestic currency:
"The stars look aligned for better AUD levels into year-end, though recent disappointments are fresh in the memory," says a strategy note from NAB released in December.
NAB says it forecasts AUD/USD getting above 0.70 next year.
Further gains on key AUD crosses are also anticipated, "justified in large part on relative interest rate ground."
AUD/USD is forecast at 0.69 by March and 0.72 by September 2026.
AUD/GBP is seen at 0.51 by March and 0.52 by September. This translates to a GBP/AUD at 1.96 and 1.92.
