- GBP/AUD has reached a ceiling and more upside will be difficult from here on up

- RBA decision leaves AUD as best-performing currency on Tuesday, March 3

- The Pound could be moved by key PMI business survey data

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1 Pound buys 1.8301 AUD at the time of writing, some 0.3% lower than at the start of the day as the Australian Dollar is seen to be the best-performing major currency in the wake of the Reserve Bank of Australia policy meeting.

The RBA kept rates on hold at its March Board meeting with the Governor's Statement only contained a couple of changes. One was significant; with the growth forecast for 2018 being adjusted from "a bit above 3%" to "faster than in 2017".

This is a minor change and the majority of analysts see today's event as largely being a 'cut and paste' job from the previous statement, hence any positive impetus granted to AUD from the RBA event might prove short-lived owing to the lack of any new information of substance.

Indeed, "against a backdrop of softer data, contentious trade rhetoric, more lively equity vol, we see little reason to be owning AUD at the moment," says a note from TD Securities in the wake of the RBA statement.

GBP/AUD peaked last week at 1.8508, successfully meeting our previous forecast target at 1.8500 but has since pulled back amidst strong quarter- and month-end selling interest.

The selling conincided with the exchange rate meeting firm resistance overhead from the 200-week moving average (MA) which is capping further gains.

Yet, our technical studies confirm the British Pound remains in an established uptrend against the Australian Dollar which appears strong, as evidenced by the bullish momentum in the lower pane (MACD), which is reflecting the exchange rate's progress higher.

Although the 200-week MA remains a big obstacle which could lead to a reversal in the trend, there are no signs of such a reversal yet and we think that GBP/AUD will continue its uptrend once it has broken clear of the MA.

A break back above the 1.8508 peak would probably confirm an extension higher to our next target is at 1.8750.

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RBA Forms Key Calendar Event for the Aussie Dollar

The RBA met once again and the pause at 1.5% in the main interest rates was unanimously expected.

Higher funding has been acknowledged by the RBA; "there has, however, been some tightening of conditions in US dollar short-term money markets, with US Dollar short-term interest rates increasing for reasons other than the increase in the federal funds rate. This has flowed through to higher short-term interest rates in a few other countries, including Australia."

The RBA also added an observation that further global monetary tightening was expected, where "as conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are expected".

The commentary around the real economy is largely unchanged. The lift in consumption growth in late 2017 is noted, although the Governor still describes consumption as “one continuing source of uncertainty”.

Commentary around the labour market continues to be ebullient, however he does note that the fall in the unemployment rate seems to have stalled with the rate falling from 5.9% in February last year to 5.5%, and recently printing at 5.6% for February.

Commentary around slow wages growth, and low inflation remains unchanged, with the next CPI report being available on April 24.

Despite the AUD having fallen from a peak of 65.7 (TWI) at end January to 62.3 (latest), the commentary around the Australian Dollar is unchanged – “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.

"Whereas some previous statements from the Governor could have been interpreted as mildly optimistic, there is nothing in today’s statement to fit that description. There is some uncertainty around the immediate growth outlook, while tightening financial conditions are noted. A slowdown in improving labour market conditions is observed while the outlook for consumption remains uncertain," says Bill Evans with Westpac.

Westpac say they have no reason to change their current view that the overnight cash rate will remain unchanged for both 2018 and 2019.

Data and Events to Watch for the Pound

The main releases in the week ahead for Pound Sterling are the PMI (Purchasing Manager Index) business surveys, which provide a timely and reliable gauge of levels of activity and growth in various different industry sectors.

"The PMI for Britain are expected to be down across the board. That would be a fairly negative combination," says ACLS's Gittler, in relation to the expected impact on Sterling.

Although Manufacturing PMI has been falling for a while both the construction and service-sector PMIs were up last month which provided a counter-weight to the negative Manufacturing data, however, "that’s not expected to happen this month. As a result, the figures could be negative for the pound," says Gittler.

He is not the only analyst to forecast a negative result, Ryan Djajasaputra an analyst at Investec, says:

"We suspect that the wintery weather during the month may have had an impact and are forecasting a two-point fall in the services PMI to 52.5 and a more modest half a point drop in the manufacturing PMI to 54.7."

Manufacturing PMI is out at 9.30 on Tuesday, April 3, and is forecast to slide to 54.8 from 55.2; Services is out at 9.30 on Thursday, April 5, and is forecast to fall to 54.2 from 54.5; and Construction at the same time on Wednesday and is forecast to decline to 51.2 from 51.4.

To round off the week there is a speech from Bank of England (BOE) governor Mark Carney at 16.15, which is significant as it may hint at whether the BOE still intends to raise interest rates in May as the market currently expects.

An interest rate hike would lift the Pound by supporting inflows of capital from investors seeking somewhere profitable to park their money.

Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here.