What is GBP/AUD?
The GBP/AUD currency pair represents the exchange rate between the British pound and the Australian dollar, or the amount of Australian dollars (the quote currency) needed to purchase one pound (the base currency). It is a minor or 'cross' currency pair because it does not contain the US dollar.
GBP, also known as the pound sterling or "Cable" in financial circles, is the oldest official currency in use in the United Kingdom and British Overseas Territories today. Although the US dollar has supplanted the British pound as the world's primary reserve currency, a position it held for centuries, the British pound continues to play a significant role in international trade and finance.
The AUD, which replaced the Australian pound in 1966, is also the official currency of Norfolk Island, Christmas Island, and the Keeling Islands, as well as three sovereign Pacific Island nations. The AUD is one of the most frequently traded currencies due to Australia's economic and political stability, minimal government intervention in the foreign exchange industry, and strong ties with major trading partners such as China and the United States.
GBP/AUD historical performance
The significance of the British pound as a reserve currency has diminished over the past few decades, and the currency's volatility has increased in the 2010s due to Brexit and other political unrest.
What affects the price of the GBP/AUD pair?
The trade balance between the two Commonwealth nations, which heavily invest in one another's economies, has an impact on the GBP/AUD exchange rate. Following the United Kingdom's withdrawal from the European Union, the two nations signed a bilateral free trade agreement in 2023. Australia is also a founding member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which the UK also joined in 2023.
Commodity prices affect the GBP/AUD pair. Australia is a significant exporter of iron ore, coal, and natural gas. Consequently, fluctuations in commodity prices can impact the value of the Australian dollar, which is also considered one of the commodity dollars in forex. For instance, a rise in the price of iron ore can increase demand for the Australian dollar, causing its value to rise relative to the British pound.
China is Australia's most significant trading partner and a major importer of Australian goods. Therefore, Chinese economic data can have a substantial impact on the Australian dollar.
What to watch out for when trading GBP/AUD?
Keep an eye on data releases and statements from:
- The Bank of England (BoE) and Reserve Bank of Australia (RBA) for announcements of interest rates and shifts in monetary policy
- The National Statistics (UK) and Australian Bureau of Statistics (ABS) for data announcements on Trade Balance, Unemployment Rate, Consumer Price Index (CPI), and Gross Domestic Product (GDP)
- Chinese economic data