GBP/AUD pullback can extend near-termMulti-week studies still supportive of GBP upsideUSD pullback can aid AUD more broadly this weekWatch AUD wage data and UK PMIs

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The Pound to Australian Dollar exchange rate is liable to weaken further over the coming days, although downside should remain relatively limited ahead of an eventual extension higher.

GBP/AUD is steadying around 1.9297 following the decline of the previous week. Broadly, the upside is still preferred over a multi-week basis as GBP/AUD is above its key moving averages.

The ADX is also still firmly in uptrend territory, but the RSI is near 50 and is neutral, which hints at waning momentum.

This hints that the 2024 rally has stalled, and there is the potential for an extension of the pullback we saw last week in the coming days.

Above: GBP/AUD at daily intervals with potential price developments and RSI in lower panel. Track GBP with your own custom rate alerts. Set Up Here

This is particularly likely if the U.S. Dollar pulls back and allows the 'high beta' Australian Dollar the space to recover. Thus, it is the global picture, particularly relating to the U.S. Dollar, that will be in the driving seat this week.

The Dollar's 2024 rally looks to be fading and a number of analysts we follow look for further moderation, which can allow the likes of the Aussie to strengthen to a small degree. For GBP/AUD, such a scenario means a move lower to 1.92, the January 30 low, is expected in the short term before an eventual recovery higher.

The Australian calendar sees the release of the Reserve Bank of Australia minutes on Tuesday. But it might be the People's Bank of China that is of more consequence on the day.

Markets will look for more hints at stimulus as authorities try to stimulate the stuttering economy of Australia's most important trading partner.

"China continues to cast a shadow on the global economic outlook. Long the key source of global demand, the economy has progressively slowed in recent years," says Taimur Baig, Chief Economist at DBS Bank. "The authorities have announced a slew of measures. Interest rates have gone in the opposite direction from the rest of the world, progressively shifting down over the past four years."

Australian PMI data for February, as is the wage price index for the final quarter of 2023, is due Wednesday.

Above: Australian wage inflation contributions, chart courtesy of Westpac.

Markets will be interested in the degree of wage momentum in the economy and whether this will play into the RBA's stance on maintaining interest rates at current levels for an extended period.

The consensus looks for a 0.9% increase quarter-on-quarter in Q4 and 4.1% year-on-year, putting wages well above levels consistent with the RBA's inflation target of 2.0%.

Any upside surprise could bolster the Aussie Dollar, although any FX reaction is liable to be short-lived given global factors are likely to be of more importance this week.

The big driver of GBP/AUD was last week's UK data, which ultimately disappointed markets and led to a sharp turn lower in the exchange rate.

This week's UK calendar is quieter, but there is the release of February PMI's for to look forward to on Thursday.

Markets look for the manufacturing PMI to have recovered slightly to 47.1, services to have edged up to 54.4 and the composite to have eased to 52.7.

The lesson of the immediate past is that the British Pound is now proving more reactive to negative data surprises, which leads us to expect that any gains that follow positive surprises in the data will be limited.

Instead, the biggest moves are likely to follow downside misses in the data, which suggests risks are pointed lower heading into Thursday.

A case in point is the significant selloff in Sterling following December's retail sales miss, which contrasts with the almost indifferent market reaction to the arguably larger upside surprise that came a month later with the release of January's figures.

Any disappointment in the data would bring that afformentioned 1.9182 target into play.