Last updated: December 8th, 2025
On the surface, the GBP looks bulletproof. Against its major peers, sterling hasn’t exactly been limping. As of December 2025, one pound buys roughly:
- $2.02 AUD
- $1.32 USD
- €1.16 EUR
- 1.06 CHF
To many investors, those numbers scream strength. Stability. A currency that has survived wars, financial crises, Brexit and political division.
So what’s the problem?
Tip: Zoom out for a better historical context of AUD/GBP performance.
Because scratch just beneath the surface – and the GBP’s resilience begins to look less like strength.
And more like complacency.
While AUD/GBP forecasts fixate on today’s exchange rates, the real story is unfolding where few analysts venture:
- UK: GDP is barely growing at ~0.5–1.0% annually, weighed down by productivity stagnation and weak consumer spending.
- Australia: Forecast growth closer to 2.0–2.5%, driven by population expansion (net migration >350,000/year) and resource exports.
Debt dynamics also matter – because FX markets hate government balance-sheet stress:
- UK public debt: Running at ~100% of GDP — with debt servicing costs exploding as maturing bonds roll onto higher interest rates.
- Australia: Public debt under 45% of GDP, with longer average maturities locking in cheaper borrowing.
This nuance suggests the forecast for GBP in 2026 looks far less comfortable than the spot price suggests.
Meanwhile, the AUD – usually dismissed as the “risk-on”, commodity-soaked underdog – may not be as weak as the narrative implies.
Yes, the AUD is notoriously sensitive to China’s growth cycles and commodity prices.
Important!
When markets turn nervous, the Aussie dollar historically wears the pain first.
But 2026 could break that familiar script.
Why Experts Are Nervous About GBP In 2026.
Are you an Australian looking to exchange your AUD for GBP?
I have great news. Forecasts predict the Aussie dollar will appreciate slightly throughout 2026.
One Australian dollar is currently being exchanged for £0.49, but forecasts from Westpac and NAB show it staying within the £0.50-£0.52 range over the next 12 months.
| AUD/GBP | Mar 26 | Jun 26 | Sept 26 | Dec 26 |
|---|---|---|---|---|
| NAB Forecast | 0.51 | 0.52 | 0.52 | 0.52 |
| Westpac Forecast | 0.50 | 0.51 | 0.51 | 0.52 |
Above: By December 2026, NAB believes AUD/GBP will be £0.52.
The GBP/AUD currency pair is currently 2.02 (as of 1 December 2025), down -3.4% over the previous 6 months.
Data-dependent fluctuations have characterised the cross-pair of late.
In early November, the AUD briefly gained some ground against both the sterling and the US dollar – thanks to a more hawkish Reserve Bank of Australia (RBA), which held rates at 3.60%.
The sterling broadly declined after GDP data released on 13 November 2025, showed the UK economy had grown just 0.1% in the third quarter (compared to an expected 0.2%, and following 0.3% growth in Q2) .
Did You know?
Of the major currencies, GBP was weakest against the AUD, hitting an almost nine-month low. That’s because the Aussie simultaneously got a boost.
ABS unemployment data, also released on 13 November, revealed Australia’s jobless rate had fallen to 4.3% from 4.5% the previous month.
Expert Tip.
The GBP/AUD currency pair is a commonly-traded cross pair (aka minor currency pair). Traders look to for making gains when major pairs like the EUR/USD or GBP/USD don’t offer opportunities.
But the sterling has been showing some signs of strength since then.
Markets didn’t go too crazy in reaction to the UK’s budget – handed down on 26 November.
But the pound did see an initial spike in value, giving the GBP/AUD exchange rate a lift.
Currency analyst Lee Hardman, from MUGF’s Global Currency Research, said on 27 November that the lack of “negative policy surprises” in the budget wouldn’t be enough to sustain upwards momentum for the pound.
However, Scotiabank’s FX forecast anticipates less easing from the Bank of England compared to the US Federal Reserve, justifying a bullish outlook for GBP moving forward.
At least relative to the greenback.
Important!
If the pound’s strength is channelled via the GBP/USD pair, what does that mean for its value compared to the AUD?
Of course, Australia’s currency should also do well against the US dollar, given the emerging rate differential.
But the AUD’s relative strength to the pound will likely hinge on factors such as:
- How well China’s policies and stimulus measures work to improve its flagging economy.
- How well our domestic economy holds up, and whether the RBA chooses to tighten or loosen monetary policy.
ING’s FX outlook for 2026 posits that with Fed cuts on the agenda and a less dominant USD, G10 countries’ activity data will play a greater role in shaping exchange rates.
(Related: What Happens In A Recession?)
Its analysts think the pound sterling will remain vulnerable moving forward, while the Australian dollar could be a ‘positive standout’.
Why Is The GBP In Decline?
As one of the strongest currencies in the world, the British pound (GBP) is a free-floating currency that is among the top four most-traded currencies on the forex market.
Key reasons for the pound’s strength include:
- Britain’s historical dominance and the pound’s longevity, being one of the oldest fiat currencies still in circulation today.
- The UK being attractive to investors as one of the world’s largest economies by gross domestic product (GDP), rated sixth behind the US, China, Germany, Japan and India.
- The pound sterling being a widely held reserve currency, alongside the US dollar, euro, and the Japanese yen, hoarded by central banks and treasuries.
While the pound has been generally stronger than the US dollar and the AUD in recent decades, a few major events have knocked the GBP’s value against leading currencies, including:
- The Global Financial Crisis of 2007-09, which saw the pound depreciate by 30%, to see it trading at around 1.40 US dollars.
- The UK’s vote to exit the European Union in 2016 that resulted in the pound falling to a 30-year low. It has yet to recover to its pre-Brexit strength.
In recent years, the pound has also lost some ground to a US dollar.
The Greenback has been remarkably resilient in the face of subdued global growth, widespread monetary policy tightening and geopolitical upheaval.
In March 2024, Bloomberg reported that the UK economy seemed to be holding up better than expected with its high interest rate, which meant the British pound was beating more than 90% of the world’s currencies.
The pound was one of the best performers – of G10 currencies – against the US dollar throughout 2024.
US ‘exceptionalism’ has been tested in 2025, with President Trump’s policies, trade wars, geopolitical tensions, soft economic data, and attacks on US institutions all reflected in the USD’s weaker performance of late.
The euro saw greater gains arising from a weaker USD than the pound. But the GBP/USD was up over 5.5% for the year (as of 1 December).
At the end of December 2024 a pound was worth US$1.25. The GBP/USD exchange rate fell to $1.21 in early January 2025 and was $1.32 at the time of writing in December 2025.
(Related: Best Cryptocurrency Exchanges In Australia).
Why Interest Rates Could Flip AUD vs GBP.
How a stronger pound against the greenback affects cross rates like the GBP/AUD in 2026 is yet to be seen.
But on the AUD side, we could see impacts from:
- Cash rate differentials — with more support for the Aussie against the pound depending on CPI data and whether the RBA considers raising interest rates.
- China’s continuing slowdown, which could erode the Aussie if upcoming economic data coming out of our largest trading partner worsens.
On the flip side, challenges facing the UK in coming months that could weaken the pound include:
- BoE rate cuts expected – with indicators of short-term inflation expectations are moderating.
- Stagnant GDP growth with estimated 0.1% growth in Q3 2025, compared to 0.3% in Q2 and 0.7% in Q1.
- Rising unemployment, with the jobless rate at 5% and vacancies for permanent jobs declining rapidly.
- Robust wage growth that could put upside pressure on inflation driven by a rise in the minimum wage.
Did You Know?
The majority of economists now believe the Bank of England (BoE) will cut rates to 3.75% when they next meet in December.
The UK’s most recent CPI data (released 19 November) shows inflation rose more slowly in the 12 months to October 2025.
But at 3.6%, it’s still well above the BoE 2% target.
The US Federal Reserve is also a shoo-in to continue easing in December 2025, bringing its interest rate range to 3.50%-3.75%.
Meanwhile, in Australia, the chances of additional interest rate cuts by the RBA have diminished. Rate hikes could become a reality, which tends to lift the AUD.
Prices are rising again, as demonstrated by 3.8% headline inflation and a 3.3% trimmed mean in the October CPI, issued on 26 November by the ABS.
ANZ senior economist Adelaide Timbrell said in November that the October CPI print showed a pattern of accelerating core inflation in recent months.
If current data is sustained, it adds to the risk the RBA won’t cut further, according to Timbrell.
The Final Verdict on AUD vs GBP in 2026.
Expected deeper monetary easing in the US, compared to the UK – and a return to hawkish sentiment in Australia – could see the Aussie and the sterling strengthen.
The pound’s strength may outweigh any investor interest in Australia’s on-risk currency if global conditions deteriorate any further.
Jody
Nelson says:
I attempted to use the “hack” to dodge conversion fees, but sadly after converting AUD to USD on a Wise account, there doesn’t seem to be a way to deposit that money into eToro; i.e. eToro recently disabled Wire transfers and Wise doesn’t support SWIFT transfers for sending USD to a bank in the US?
John Keys says:
CMC Invest are an abysmal in turning around new accounts.
Over 1 month to setup up an account with an investment trust, and still waiting. I was promised 5 business days.
Reg Watson says:
Given that China’s economy is going down the toilet how the heck do we expect an appreciation of the Aussie in 2024 ? We are tied to China.
Regular citizen says:
Unless you can see into the future or time travel, try to refrain from predicting a stronger AUD. It’s now Dec 2025 and contrary to all you top earning ‘economists ‘, the AUD ain’t shit.