Pound-to-Australian Dollar Week Ahead Forecast: Nose Pointed Downwards

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Early losses for the Aussie Dollar don't damage its building upside potential against the pound.

The pound to Australian dollar exchange rate (GBP/AUD) rose at the start of the new week as a result of the downbeat tone to market sentiment, with all eyes on an increasingly belligerent Donald Trump.

Trump looks set to impose tariffs on EU partners over their refusal to allow him to buy Greenland, while on Monday he sent a note to Norway's Prime Minister saying he no longer felt the need to think "purely of peace".

"The AUD struggled against the cross rates due to weaker risk sentiment," says Samara Hammoud, FX strategist at Commonwealth Bank. "A key barrier to gains in AUD is the resumption of trade threats between Europe and the US."

Tensions are ratcheting up and the EU is preparing its own set of counter tariffs.

This makes for a downbeat tone that the Australian dollar is particularly vulnerable to and explains GBP/AUD's rise to 2.0049 in early trade.

Yet, by the time of writing, the GBP/AUD has faded those gains and is back in the red. One would be forgiven for asking if anything has really happened at all.

This is understandable: muscle memory is important. The TACO trade was a feature of 2025 that saw traders profit by betting Trump Always Chickens Out.

If TACO is still applicable today, it stands that traders preempt TACO by not reacting negatively to his latest schemes.

Above: The GBP/AUD daily chart points to lower levels in the coming days and weeks.

There's also the important matter of the U.S. Supreme Court which will rule on the legality of tariffs any day now.

Polymarket - which is very good at predicting outcomes - sees a 70% chance Trump's use of certain powers are, in fact, illegal.

If that's the case, markets could rebound aggressively, and we'd expect the Australian dollar to lead the charge in the G10 complex.

This would pressure GBP/AUD below 2.0 once and for all.

Given this, it's little wonder that sterling isn't making hay against the high-beta Aussie on Monday.

Technicals are also negative, with the daily chart pointing to an imminent break below 2.0: the pair is restricted below the nine-day exponential moving average which is pointed lower, making a final break of that big support at 2.0 likely before long.

📆 Turning to the calendar, keep an eye on the UK on Tuesday and Wednesday where we have labour market and inflation data.

Our data preview, which is here, suggests some upside surprises are in store, which can offer some temporary relief in GBP/AUD.

📊 Australia looks forward to the release of the December labour force survey this week Thursdsay).

"Our Australian economics team estimates jobs rose by around 35,000 and the unemployment rate eased to 4.3%. A stronger‑than‑expected labour market could encourage markets to increase pricing of a February rate hike by the Reserve Bank of Australia (our base case) and push AUD/USD toward its year‑to‑date high of 0.6767," says Samara Hamound, FX strategist at Commonwealth Bank of Australia.

AUD/USD at new highs would be reflected by a sub-2.0 GBP/AUD.

However, disappointing data from Australia could delay these levels.