What the British Pound’s Surge Means for the AUD

The British pound is making headlines. Climbing to its highest level against the US dollar in nearly four years, sterling is now one of the top-performing global currencies of 2025. And according to deVere Group CEO Nigel Green, this upward momentum is far from over:

“The pound is in flight right now and we believe it is likely going higher.”

But what does a stronger pound mean for the Australian dollar—and for Australian businesses trading across borders?

Global Currency Shifts: AUD in the Middle

In a volatile macroeconomic landscape, the AUD is being squeezed between a weakening USD, a surging GBP, and a more resilient-than-expected euro. For Australian businesses, particularly importers and exporters, this creates a complex web of pricing pressure, hedging risks, and opportunity:

• Against the USD, the Aussie dollar is expected to stay relatively soft in the short term as US political and fiscal uncertainty mounts. This keeps commodity exports attractive—but also drives up the cost of USD-denominated imports and offshore services.

• Against the GBP, the AUD has weakened in recent months. If deVere’s prediction comes true and the pound pushes past $1.40 USD, it could lead to a more expensive UK import market and reduce price competitiveness for Australian exporters selling into the UK.

• The euro, still facing sluggish growth and divergent monetary policy within the EU, may hold steady—but the broader implication is clear: currency divergence is back, and volatility is increasing.

Why This Matters to Australian Businesses

For SMEs and larger Australian companies with international exposure—especially in e-commerce, tourism, manufacturing, and logistics—these currency moves are more than just numbers on a screen. They influence:

• Input costs and supply chain pricing, especially for those sourcing materials from the US or UK.

• Demand for Australian goods abroad, with the falling AUD potentially boosting tourism and commodity exports—but hurting global purchasing power for tech, machinery, and investment goods.

• Investment decisions, as overseas ventures, mergers, and capital raising become more expensive if denominated in GBP or USD.

Strategic Takeaways for the Next 6–12 Months

1. Watch UK Trade Relations Closely
   The UK’s new trade agreement with the US, announced at the G7 summit, may not immediately shift the needle for Australia. But it signals renewed UK global engagement and could lead to greater demand for high-quality Australian goods and services—especially as British consumer and business spending picks up.

2. Consider Hedging for GBP and USD Exposure
   With expectations that the pound will breach $1.40 USD within the next year, businesses heavily exposed to the UK market should revisit their currency risk strategies. Likewise, any signs of a Fed rate cut could fuel further USD weakness—favouring exporters but squeezing importers.

3. Opportunities in FX Diversification
   As Nigel Green points out:

   “There’s a global push away from overreliance on the US dollar as a reserve currency. That macro trend adds another layer of support for alternatives like sterling.”
   Australian firms may benefit from more multi-currency invoicing, offshore accounts, or forward contracts as a way to cushion against unpredictable shifts in the USD-AUD rate.

4. Policy & Interest Rates Will Be Key
   If the RBA holds or hikes while the Bank of England moves slowly to cut, the AUD-GBP spread could widen further. On the other hand, coordinated rate cuts by the RBA and Fed might stabilise AUD-USD temporarily, but long-term fiscal imbalances in the US may keep downward pressure on the greenback.

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