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The Pound to Australian Dollar exchange rate (GBP/AUD) could be prone to near-term weakness according to a new assessment from strategists at UBS.

"This week, we recommend going long the Australian dollar versus the British pound," says Thomas Flury, Strategist at UBS Switzerland AG.

The call comes following a period of relative underperformance by the Australian Dollar against most of its G10 contemporaries.

This underperformance includes a 1.22% loss against the Australian Dollar over the course of the past month that extends to over 4.0% for 2023 as a whole.

"AUD has lagged some other G10 currencies recently in the broad USD decline, due to an early pause from the Reserve Bank of Australia (RBA) and some weaker labour data in January, which sparked a widening of Australia’s yield discount," says Flury.

The RBA opted to maintain rates at 3.6% and said its decision provides the Board with more time to assess the state of the economy and the outlook.

However, UBS strategists note Aussie labour data have strengthened again of late and consumer confidence rebounded with house prices ticking higher in March.

The Australian dollar rose against other major currencies on Thursday, April 13 following the release of better-than-expected labour market data.

Australia's employment grew by 53K jobs in March according to the latest Labour Force survey, surpassing market expectations of 20K.

The unemployment rate remained steady at 3.5%, defying expectations of a slight increase to 3.6%.

As a result of the better-than-expected numbers, the Australian dollar was the strongest-performing G10 currency on Thursday.

The developments lead UBS currency strategists to assess that at least two further hikes are now likely from the RBA.

"The Bank of England is expected to pause its tightening cycle, while the RBA likely still has one if not two hikes to go, and these are not currently fully priced in yet," says Flury.

The China-sensitive Aussie Dollar is also expected to benefit as the recovery in the world's second-largest economy is expected to build over the second quarter of 2023.

UBS notes credit and housing data out of China signals a quicker rebound.

Analysts also note an improvement in relations between China and Australia as disputes over tariffs on some exports could be resolved and thermal coal shipments are again on the rise.

"The AUD has greater leverage to these dynamics, so we see both fundamental and technical reasons to be long AUDGBP," says Flury.

Strategists forecast a move in AUD/GBP to 0.58, which gives an approximate GBP/AUD target of 1.7241.