- GBP/AUD is in a short-term downtrend which is expected to extend in the week ahead.

- Main releases for Sterling are inflation and retail sales data

- The Australian Dollar's key data release is contruction work done which analysts are hoping will show a recovery

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The Australian Dollar is trading with a bearish bias as the new trading week begins, with one Pound buying 1.7927 Australian Dollars on the interbank market at the time of writing.

After peaking at 1.8509 in March the pair has declined to the current level, beginning a short-term downtrend which is expected to extend.

GBP/AUD has also broken below a major trendline drawn from the September 2017 lows in another bearish sign for the pair.

The MACD indicator has broken below the zero-line (circled below) signifying the trend is now probably down.

The four-hour chart below shows the falling peaks and troughs of the short-term downtrend more clearly.

A break below the 1.7900 lows would probably confirm a continuation down to an initial target at 1.7800.

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AUD: What to Watch

Data for the Australian Dollar in the week ahead begins with the release of 'construction work done' at 02.30 GMT on Wednesday, May 23. After the extremely poor -19.4% precipitous drop in the previous quarter (Q4) analysts will be watching for signs of a rebound but any disappointment may weigh on the Aussie.

"Q1 work done feeds into GDP via dwelling investment and engineering. After a couple of soft quarters, we expect a pickup in residential construction (building approvals on the rise) while engineering investment is likely to be flat or a small positive. Overall we look for a 2% lift, adding slightly to our tracking of 0.8% q/q for Q1 GDP," says TD Securities.

Another key event for the currency on Wednesday will be a speech from Reserve Bank of Australia (RBA) Governor Lowe in which he may provide hints of plans for future monetary policy.

The Westpac Leading Index is out on Thursday at 01.30 and a speech from RBA Bullock on Friday rounds off the calendar in the week ahead for the Australian Dollar.

GBP: What to Watch

It's a busy week ahead for Sterling traders, with a welter of economic releases due for the Pound.

Inflation data, out at 9.30 on Wednesday, forms the main data event with traders looking to see whether prices are moving in a direction consistent with further interest rate rises at the Bank of England. Over recent months we have seen the Pound become increasingly attuned to Bank of England interest rate expectations; moving higher when expectations for a rate rise increase, and moving lower when those expectations are rowed back.

We recently reported that economists at Capital Economics are expecting two interest rate rises in 2018 which would present an highly bullish outcome for Sterling, but the data will have to start moving in the right direction very soon for this assumption to prove correct.

And of course, the Bank of England is watching the data and will only move on rates once they have evidence the economy is picking up pace once more.

"UK inflation figures from April will be closely watched by markets and influence the pricing of Bank of England," says Andreas Steno Larsen, a strategist at Nordea Bank.

Inflation is expected to fall to 2.1% from 2.3% as base effects from the weak Pound start to fall away.

"As for April there is a clear risk of a rather low result due to base effects," adds Larsen.

Analysts at Investec are more bullish about inflation in April:

"We expect to see inflation tick up to 2.6% from 2.5%, albeit with the April rise likely to be a blip on a path in which we see inflation moderating," says Investec economist Victoria Clarke.

Global oil prices have been on the rise, and we would expect this to perhaps deliver an upside surprise. However, the core CPI release will therefore be crucial as it strips out the likes of external one-offs like oil, and the Bank of England uses the number as a proxy for underlying wage growth. In short, a beat on the core CPI would likely help Sterling higher, core is forecast to read at 0.5%.

In other UK releases, retail sales figures due Thursday morning will also be closely watched amidst concerns about UK growth (and consumer spending) momentum.

The BRC’s April figures were particularly weak, with the timing of Easter a depressing factor; we suspect the ONS’s Easter timing adjusted numbers will not look quite so gloomy.

The second estimate for UK GDP growth is due at the end of the week where Clarke suspects we will see an unrevised reading of +0.1% print. A beat would however likely boost Sterling.

Right at the beginning of the week we get some second-tier numbers with public sector finances released at 9.30, they are expected to show government borrowing fall by 7.0bn in April. Recent public sector data has been positive on the whole so a further fall in borrowing would be seen as a positive for the economy, although a surprise reading either way would pobably be necessary to move the Pound.

The Consortium of British Industry will also be releasing two reports for the month of May: the CBI Industrial Trends survey at 11.00 GMT on Monday and the Distributive Trades survey at the same time on Wednesday. Both will provide the most up-to-date information on economic activity in the UK and could, because of their timeliness, impact on Sterling.

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.