The GBP/AUD pair has witnessed many ups and downs throughout its history. While an ongoing Brexit saga continues to hamper the value of the British pound, the performance of the Australian dollar has been fairly solid amid the news of a new round of trade negotiations between the US and China. Considering all the global geopolitical and economic uncertainty, is it a good time to invest in the GBP/AUD pair? In this article, we cover the recent performance of the currency pair and take a look at the GBP to AUD forecast 2019 and beyond.
Back to basics: everything you need to know about the GBP/AUD pair
The GBP/AUD is the British pound to Australian dollar currency pair. It represents how many Australian dollars — which is the quote currency — are needed to buy one pound — the base currency.
The GBP/AUD is an example of what's known as a cross-currency pairing, meaning that the given pair does not include the U.S dollar and can be traded directly, without using the U.S. dollar as a contract settlement currency. These have become very popular, and due to the high volume of trades, the spreads have tightened, making it even cheaper to move from one currency to another.
Both the British pound and the Australian dollar are included in the list of eight most traded currencies worldwide, making this pair one of the most popular in the foreign exchange market. Today, many novices and veterans alike choose to trade this forex mammoth.
One of the main reasons why traders choose the GBP/AUD pair is because it allows them to exchange pounds for Australian dollar directly, protecting them from volatilities associated with the U.S. dollar.
Moreover, the Australian dollar is loved by many for the stability of Australia's political system and economy, the comparatively high interest rates in Australia and the relative freedom of the forex market from government intervention. Besides, there is a prevailing view that the Australian dollar can bring diversification to your portfolio due to its greater exposure to Asian economies and the commodities cycle.
All in all, GBP/AUD is considered a solid pair with two stable currencies. Undoubtedly, things can always change in a blink of an eye, but, for the most part, this pair has proven itself to be a rather sound investment option.
Factors that impact the GBP/AUD value
There are a number of factors that influence the value of the GBP and AUD in relation to each other and other currencies. First and foremost, one of the key drivers of the pair’s rate is the overall health of the world’s two major economies: those of the United Kingdom and Australia. Particularly important points to look out for are the countries’ GDP growth, unemployment rates, import and export data, inflation or any relevant events with high economic significance.
AUD is considered to be a commodity currency. The prices of oil, gas and gold have a large impact on its value. This dependency on commodities makes the Australian dollar a risk currency. Moreover, the decline in China’s growth, one of the key customers for Australian commodities, and the global economic slowdown have had a negative effect on the currency in the past couple of years.
For instance, in 2015, oil prices hit decade lows, and both coal and iron ore prices tumbled. Unsurprisingly, the Australian dollar weakened sharply and almost reached parity against the New Zealand dollar, a level not seen since the 1970s.
Additionally, the interest rate differential between the Bank of England (BOE) and the Reserve Bank of Australia (RBA) may also affect the value of GBP and AUD when compared to each other. Higher interest rates typically have a positive effect on the currency, at least in the short term, and vice-versa. Therefore, this factor should also be considered when analysing the market and possible future direction for the GBP/AUD pair.
Trade British Pound / Australian Dollar CFD
Fortunately, modern financial markets have full media coverage. All the needed information can be easily found from a wide variety of resources, both online and offline, giving you the opportunity to stay on top of the latest market trends and news.
In general, the market movements of this currency pair tend to be rather volatile, characterised by sharp and rapid price fluctuations. This unpredictable behaviour makes it hard to predict the GBP to AUD outlook.
Nonetheless, the GBP/AUD pair can also offer great opportunities for experienced investors and traders who are looking for a great diversification tool and want to move away from the forex majors, such as EUR/USD, GBP/USD, EUR/GBP or USD/JPY.
The GBP/AUD price analysis: the story of incredible volatility
Let's take a look at the pound to AUD trend by checking its historic exchange rate for the past 17 years:
After 2008, the pound depreciated relative to the Australian dollar. It took it almost 5 years to start making a significant rebound in 2013 when a slowdown in the global commodity cycle and declining China’s growth have hurt Australia's largest sector, mining.
The pair hit its all-time high of 2.934 on July 22, 2002. However, for the next 10 years, the GBP/AUD price was mainly in the downtrend, falling to its lowest of 1.452 on March 11, 2013.
Ever since then, the pair’s rate has been continuously experiencing large price swings caused by various economic and political events.
GBP to AUD forecast for years ahead: what will the chart look like?
At the beginning of this month, the pound’s reaction to Brexit developments has dominated all the headlines. Meanwhile, the performance of the Australian dollar has been fairly solid.
Last week, AUD found support in the hopes for the US and China to wrap up the trade war, as the world’s superpowers planned a new round of negotiations for the next month. Since China is Australia’s key trading partner, this news has contributed to AUD strength.
On top of the US-China trade hopes supporting trade-correlated currencies, cooling political unrest in the UK, Hong Kong and Italy have further boosted market risk-sentiment.
Based on the sterling against Australian dollar forecast from Walletinvestor.com, a long-term increase is predicted for the GBP/AIUD pair. Their exchange rate prognosis for August 2024 is set at 2.180. Therefore, if you decide to invest in this pair today, the revenue is anticipated to be around +21.5% in 5 years.
Based on their GBP to AUD predictions, the pair is anticipated to continue the upward dynamic:
According to another popular online forecasting service, Longforecast.com, the GBP/AUD rate is expected to hit 1.610 by October 2023.
Here is their pound to Australian dollar forecast for the next few years:
In regards to short-term perspectives, according to the information provided by 30rates.com, the GBP/AUD pair is prognosed to trade around 1.7893 by October 10, 2019.
Taking into account the overall global political and economic uncertainty, it may not be the best time to make long-term investment commitments to the GBP/AUD pair. However, you can still try to profit from the forex volatility through the contracts for difference, or CFDs.
You can learn more about CFD trading with free online courses and stay on top of the latest pound vs Australian dollar news with Capital.com.
What are your bets on the pound to AUD forecast?