AUD/USD Weekly Fundamental Analysis – May 9 -14, 2016 -Forecast

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Updated: May 7, 2016, 05:45 UTC

The AUD/USD fell 3.09% trading at 0.7368. The RBA got a new governor this week as a new government took the reins in the country but that was not until

AUD/USD Weekly Fundamental Analysis – May 9 -14, 2016 -Forecast

The AUD/USD fell 3.09% trading at 0.7368. The RBA got a new governor this week as a new government took the reins in the country but that was not until the central bank dropped lending rates by 25bps. , the RBA lowered its inflation forecast. The Australian Construction Index was surprisingly strong, climbing to 50.8 points. This marked the first time that the indicator has pointed to expansion in five months. In the US, Nonfarm Payrolls plunged in April, falling to 160 thousand, compared to the estimate of 203 thousand.

The Australian dollar dropped sharply on Friday, in response to the RBA policy statement in which it lowered its inflation forecast. In the statement, the RBA projected inflation levels between 1 and 2 percent in 2016, and then from 1.5 percent to 2.5 percent through mid-2018. In its February statement, the RBA had predicted inflation running between 2 percent and 3 percent, which is the central bank’s official inflation target. This points to serious concern on the part of the RBA regarding the inflation picture, and many analysts expect another 0.25% rate cut in August, which would lower rates to 1.50%. Until last week, the markets were expecting the RBA to remain on the sidelines, but a decline of -0.2% in first quarter CPI proved to be a game-changer and the RBA responded with a surprise quarter point cut, lowering rates from 2.00% to 1.75%. In addition to the inflation problem, the central bank has often expressed its concern about the high value of the Australian dollar, which has hurt the critical export market.

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.

Major Economic Events for the week:

	Cur.	Event	Actual	Forecast	Previous
Sunday, May 8, 2016
	CNY	Trade Balance (USD) (Apr)		40.00B	29.86B
Tuesday, May 10, 2016
	CNY	CPI (YoY) (Apr)		2.4%	2.3%
Wednesday, May 11, 2016
	GBP	Manufacturing Production (MoM) (Mar)		0.3%	-1.1%
	USD	Crude Oil Inventories			2.784M
Thursday, May 12, 2016
	GBP	Interest Rate Decision (May)		0.50%	0.50%
Friday, May 13, 2016
	USD	Core Retail Sales (MoM) (Apr)		0.5%	0.1%
	USD	PPI (MoM) (Apr)		0.3%	-0.1%
	USD	Retail Sales (MoM) (Apr)		0.7%	-0.4%
Saturday, May 14, 2016
	CNY	Industrial Production (YoY) (Apr)		6.5%	6.8%