Reserve Bank of Australia (RBA) expectations have swung sharply toward tightening, with Governor Bullock ruling out further cuts and leaving the door open to hikes next year. The shift has boosted the AUD, with strategists seeing further downside ahead for GBP/AUD, ING's FX analyst Chris Turner notes.

AUD strengthens as policy outlook turns more hawkish

"Reserve Bank of Australia policy expectations have actually been the front-runner in the global rush to reassess policy easing cycles. Over the last six weeks, the one-month AUD OIS priced one year forward has swung from 3.08% (implying around 50bp of RBA cuts) to 4.07% (close to 50bp of RBA hikes)."

"Last night's RBA meeting provided more fuel to the fire, with governor Michele Bullock seemingly ruling out any further rate cuts and contemplating rate hikes next year should core inflation prove persistent, and the labour market hold up."

"The Australian dollar was one of our top picks in our 2026 FX Outlook, and we think a cross rate, like GBP/AUD, has plenty of room to correct lower."