AUD/USD Fundamental Forecast – May 9, 2016

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Published: May 6, 2016, 03:06 UTC

The AUD/USD tumbled 68 points after the RBA statement this morning. The Aussie fell to 0.7398 as the US dollar gained. The Australian dollar headed for a

AUD/USD Fundamental Forecast – May 9, 2016

The AUD/USD tumbled 68 points after the RBA statement this morning. The Aussie fell to 0.7398 as the US dollar gained. The Australian dollar headed for a third weekly decline before its central bank gives its update on monetary policy and the economy on Friday, following its decision this week to cut the key rate for the first time in a year.

“Today’s RBA statement on monetary policy will reaffirm the central bank’s dovish stance and limit AUD relief rallies,” said Elias Haddad, FX strategist at the CBA. “In terms of the economic forecasts, the RBA will revise down their inflation forecasts but there is a good chance that they have to revise up GDP.”

As a refresher, here are the RBA’s economic forecasts offered in its prior SOMP in February. With markets and economists continuing to favor a further rate cut from the RBA, perhaps as early as August, the inflation forecasts will be closely scrutinized by markets, and likely impact the Aussie.

A downgrade is expected following last week’s soft CPI report; the only question is by how far. As the key jobs report for the largest economy in the world, the payrolls will likely generate significant volatility across markets, including in the Australian dollar. Traders attributed the currency’s fall to covering of dollar short positions ahead of Friday’s U.S. jobs data.

A Reuters survey showed economists expect U.S. payrolls likely rose by 202,000 in April after increasing by 215,000 in March.

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