AUD/USD Fundamental Analysis – week of July 11, 2016 -Forecast

The AUD/USD gained 1% to 0.7572 as commodity currencies gained after the RBA held rates and policy. The dollar fell on Friday after the US June jobs report showed strong hiring but also some worrying weakness in the labour market. The Labor Department’s blockbuster jobs number – 287,000 payrolls added in June – was a welcome rebound from a dismal May report.

But other aspects of the June report weighed on expectations for a Federal Reserve interest rate hike anytime soon. May’s already meager hiring was revised sharply downward, the unemployment rate rose more than expected and wage growth slowed slightly.

“We’re not impressed,” said Kathy Lien, head of forex strategy at BK Asset Management. “Judging from the performance of the dollar post-payrolls, most forex traders share our views.”

Standard and Poor’s placed Australia’s AAA sovereign credit rating on watch “negative”, implying that there is now a one-in-three chance that it will be downgraded within the next two years without remedial action to address the agency’s concerns.

As soon as the announcement hit, the Aussie tumbled by 1% in a matter of seconds before rebounding in the hours following.

The RBA was one of the first central banks in a developed economy to meet after the Brexit decision, so economists around the world were closely watching is actions as an indicator of what actions central banks the Northern hemisphere might take to calm markets. But statements from the RBA seem to indicate that if anything, the bank is fairly unconcerned about Brexit risks and the knock-on effects they will have on the country’s economy.

While the latest GDP figures suggested the economy is humming along nicely, the reality on the ground suggests otherwise. The Reserve Bank is content to wait before further cutting rates, but the worsening outlook for the world economy suggests that whoever does end up in power once the counting has been done might not have the luxury of leaving all the heavy lifting up to the RBA.

The RBA’s statement on Tuesday talked of the international and domestic economies as it always does. It referred specifically to Brexit, noting that “any effects of the referendum outcome on global economic activity remain to be seen and, outside the effects on the UK economy itself, may be hard to discern”.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.