The British pound is expected to stay weak against the Australian dollar as the UK’s Budget on November 26 approaches. Analysts recommend selling GBP/AUD at 2.0380, setting a stop loss at 2.06, with a target of 1.972. Concerns about the upcoming UK Budget have hurt the pound, leading to negative feelings in the market. Bad UK economic news has caused the pound to fall, while good news has not provided much support.

Negative Correlation With Gilts

This situation has resulted in a negative link between the pound and 10-year Gilts. Normally, the pound benefits from low volatility, but it hasn’t reacted positively recently. In contrast, the Australian dollar has performed well over the last month. Its strength comes from the Reserve Bank of Australia’s strong stance and the likely end of its easing cycle depending on inflation data. China’s economy is showing signs of improvement, even with challenges in its property market, which supports the Australian dollar. Positive news from China’s Fourth Plenary Meeting or the US-China APEC meeting could boost the dollar further. The Australian dollar also has a stronger fiscal position compared to other G10 currencies, making it a good choice for diversification. However, this outlook could change if the UK Budget results surprise positively or if the Reserve Bank of Australia changes its position. We anticipate that the GBP/AUD pair will keep falling as the market gets anxious ahead of the UK Budget on November 26. The negative sentiment means that weak UK data hurts the pound, while strong data doesn’t help much. Traders in derivatives should think about strategies to profit from a drop towards the 1.972 target.

Market Reactions And Future Strategy

This prediction aligns with the market’s response to recent events. For example, the UK’s September retail sales data, which dropped by 0.4%, weakened the pound immediately, while a slightly positive manufacturing PMI the previous month did not lead to a rally. The 10-year Gilt yield has risen by 20 basis points since late September 2025, signaling investor worries about the UK’s fiscal situation and borrowing needs. On the other hand, the Australian dollar benefits from a strong Reserve Bank of Australia, with money markets estimating only a 15% chance of an interest rate cut before mid-2026. This strong position is likely to be confirmed if upcoming Q3 inflation data, expected on October 22, exceeds the forecast of 3.9%. Looking back at 2023, we saw that unexpectedly high inflation can quickly change RBA policy expectations and strengthen the currency. Additionally, the Aussie’s strength is supported by a cautious recovery in sentiment towards China, its largest trading partner, as its industrial sector shows signs of stabilization. Australia’s fiscal position remains a key advantage, with a debt-to-GDP ratio around 45%, much lower than many G10 countries. This makes the currency appealing for reserve managers seeking diversification. Given this context, purchasing GBP/AUD put options that expire in December 2025 may be a smart way to bet on a decline. This approach allows traders to take advantage of potential drops around the UK budget, while limiting their maximum loss to the premium paid. It also benefits from the expected rise in implied volatility as the budget announcement gets closer. We need to keep an eye out for any signs of an unexpectedly good UK budget funding gap, which could lead to a quick recovery for the pound. Likewise, any unexpected shift towards a more cautious approach from the Reserve Bank of Australia might weaken the Aussie. Traders should stay alert for these risks, which could impact this forecast. Create your live VT Markets account and start trading now.

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