Pound to Australian Dollar Rate Week Ahead Forecast: Is the Peak In?

• GBP/AUD uptrend intact
• But coming days could see consolidation below recent highs
• Watch U.S. data for broader AUD direction
• UK jobs report is GBP highlight of the week

Image © Adobe Stock

The Pound to Australian Dollar exchange rate hit a new 2024 high at 1.9553 last week but ultimately capitulated and ended the week flat, raising the odds of a softer trading conditions in the coming week.

Momentum in GBP/AUD has turned neutral with the RSI close to the 50 level, and we are looking at a risk of consolidation between the 50-day moving average at 1.9262 and the 2024 high at 1.9553 over the coming five or so days.

The GBP/AUD topped out at its highest level since September 2023 after a strong and broad-based recovery in AUD during the second half of last week.

This AUD rebound was linked to a rise in expectations that the U.S. Federal Reserve would cut rates in June, which boosted equity market sentiment and global growth expectations.

These are traditionally supportive developments for the high-beta AUD and will remain the single most important driver for AUD exchange rates in the coming week.

Nevertheless, technicals on the GBP/AUD daily chart remain constructive, with the exchange rate trading above the 50-, 100-, and 200-day moving averages (DMAs). As a general rule of thumb, we would look for breaks below the 50 and 100 DMAs for signs of a turning trend, and a break below the 200 DMA would mark an official call that the pair has entered a downtrend.

Above: GBP/AUD at daily intervals. Track GBP and AUD with your own custom rate alerts. Set Up Here

So while the bigger, multi-week picture remains supportive of GBP/AUD upside, the coming days are liable to see a consolidation of the February-March rally, potentially building a platform from where further advances could shape up.

There are no major domestic developments due from Australia and the global picture, specifically the evolution of U.S. rate expectations, will drive GBP/AUD direction this week.

Bets for a U.S. rate cut will increase if Tuesday's U.S. CPI inflation release undershoots the 0.4% month-on-month and 3.1% year-on-year increase the market expects. The core CPI figure could be more important, with 0.3% m/m and 3.7% y/y anticipated.

Above: U.S. inflation's descent has slowed of late. Image: UniCredit.

Given the notable rise in odds of a June rate cut at the Fed over recent days, the bigger surprise would come on an above-consensus print, as this would spoil the growing market narrative.

As such, expect the bigger market reaction to follow a stronger-than-expected print (Pound-Australian Dollar upside). Any undershoot would meanwhile boost the Aussie Dollar more than the Pound, prompting further GBP/AUD downside.

The British Pound is 2024's best-performing G10 currency and offers an idiosyncratic explanation for recent GBP/AUD gains.

The Pound will be tested on Tuesday when UK wage data is released; any undershoot would prompt a potentially notable pullback in Pound exchange rates.

Above: UK wage is expected to slow further. Image: UniCredit.

The market looks for a 5.7% increase for January (when bonuses are included) and a 6.2% increase when bonuses are excluded.

Keep an eye on Wednesday's release of monthly GDP figures. For January, a figure of 0.2% month-on-month is expected.

Any above-consensus print in either the GDP or wage figures could help the Pound on its journey higher.

"The quality of the data will likely inform the MPC decision as its members debate the appropriateness of the current policy stance. With that in mind, evidence that the UK economy rebounded at the start of 2024 while the UK labour market remained tight could be seen as delaying any decision to lower rates from here and thus could help boost the rate appeal of the GBP," says Valentin Marinov, head of FX research at Crédit Agricole.