Since mid-January 2026, the GBP/AUD pair has fallen from about 2.05 to around 1.92, a drop of over 5% year-to-date as of February 12. This quick drop has surprised many traders who thought it would stay above 2.00. So what’s going on?
Why the Pound is Sliding
The main reason is that the central banks have different plans. On February 3, 2026, the Reserve Bank of Australia (RBA) surprised people by raising the cash rate by 0.25% to 3.85%. The RBA and Commonwealth Bank (CBA) said this was because inflation wasn’t going away and the job market was still strong. Governor Michele Bullock has kept a tough stance, even saying they might need to raise rates again to get inflation back to the 2–3% target.
On the other hand, the Bank of England (BoE) seems to be moving toward making things easier. While the BoE kept rates the same at its last meeting, the vote was close, with some members wanting to cut rates. Markets now think the UK will be more relaxed, as GDP growth is slow, with the Office for National Statistics (ONS) predicting only 1.1% for 2026.
Is the Aussie Overvalued?
Even though the RBA is raising rates to slow down local demand, Australia’s economy relies heavily on Chinese industrial output. If China’s recent efforts don’t lead to real growth, the commodity bonus that’s helping the Aussie could disappear.
If this happens, the pound might bounce back from its current lows. Estimates suggest the GBP will weaken a bit, with LongForecast predicting a range of 1.6890-1.9910, falling to 1.7250 by December. J.P. Morgan’s December 9, 2025 report sees the GBP continuing to struggle, favoring a stronger AUD.
GBP/AUD Forecast
GBP/AUD pivots at 1.9200 and the RSI at 19 signals control by the sellers. The pair will likely have its initial support at 1.9097, near the lower Bollinger Band. A stronger downside momentum could send the action lower to test the psychological 1.9000. On the upside, immediate resistance will likely be at 1.9317, beyond which the downside narrative will be invalid. The 1.9400 level will likely be the next barrier.
GBP/AUD on the daily time frame with the key levels of resistance and support on February 12, 2026. Created on TradingView
The RBA’s interest rate increase to 3.85% and the BoE’s move toward rate cuts caused the drop. This divergence made the Australian Dollar much more appealing to investors looking for yield.
A recovery is possible if UK economic data beats the BoE’s conservative 1.1% growth forecast or if global commodity prices cool, reducing the Australian Dollar’s “resource-linked” strength.
While the RBA’s tough stance helps the Aussie, the pair is currently oversold. Buying AUD at 13-year highs against the pound carries the risk of a short squeeze if the RBA stops raising rates.