AUD/USD Monthly Fundamental Forecast – May 2016

The AUD/USD is looking ahead to the RBA meeting the first week of the month as traders positioned at the end of the month ahead of Mr. Stevens comments. The Aussie is trading at 0.7602 with a decline of 0.73% but year to date gains of 4.42%. The RBA would like to see the pair trading closer to the 0.75 level but the weak US dollar is causing problems. This week’s Chinese data will have some effect on the Australian dollar.

Australia’s weak March quarter inflation report has been a game-changer when it comes to the outlook for Australian interest rates.

Traders are now betting on a rate cut next week, and they’ve now been joined by the NAB’s economic team who have joined them in calling for a 25bps reduction.

“We assess this as a 55%/45% chance reflecting the Bank’s ability to do slightly more to reduce Australia’s unemployment rate given the very low inflation situation in Australia revealed by today’s very low core CPI outcome,” said Alan Oster, chief economist of the NAB in a note late on Wednesday.

“That said we remain generally optimistic about the near-term performance of the Australian economy and labor market, especially on the east coast of Australia. It is really a fine judgment about the lack of risk in adding a touch of stimulus given low inflation. (BusinessInsider).

FxEmpire analysts expect the currency to fall to the 0.72 price level this month.

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.

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