AUD/USD Monthly Fundamental Forecast – July 2016

The AUD/USD had a brilliant month on the weaker US dollar and hopes of Chinese stimulus while Aussie data printed better than expected. The coming month will be all about the RBA.  The pair is trading at 0.7499 with a gain of 3.56% and a year to date gain of almost 3%.

The Reserve Bank’s July board meeting has suddenly become ‘live’ after Britons voted to separate from the European Union. The stunning and historic vote has left a trail of destruction on markets, with only safe havens such as the Japanese yen and gold rising amid the carnage.

Analysts had been expecting the RBA to wait on inflation data on July 27 before deciding whether more stimulus would be required, hence why the August meeting held a much greater chance of a cut than the July meeting prior to the Brexit poll.

In the eyes of investors this means there will be major consequences for the global economy and, potentially, force the RBA to trim rates to a new record low at its next meeting on July 5.

Futures markets are now pricing in a 53.3 per cent chance of a cut, up sharply from a mere 19.6 per cent chance on Thursday.

“While it’s difficult to foresee the exact Brexit fall out, there’s now a chance we see a RBA rate cut at the July 5 meeting and were that to happen another one or two more rate cuts could follow it in 2016,” IG market analyst Angus Nicholson said.

Should the RBA act it would push the cash rate down from its current record low of 1.75 per cent to 1.5 per cent.

Our forecast for July 2016: 0.735-.07450

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.