Positive data released this morning provided support to the AUD.

It became known that Australian foreign trade deficit fell by 2.163 billion in March against the rise of 3.044 billion in February and the forecast of 2.900 billion. The decline was caused by the rise in the price of iron ore, which is the main item of Australian export.

The total volume of exports, which is an important indicator of the economic growth pace in the country, has grown by 4% against the decline of 1% a month earlier. At the same time, export of services is growing rapidly. Import has also grown by 1% against zero growth in February, indicating slow rise in the domestic demand. Volume of retail sales also slightly increased in March (+0.4% against the forecast of 0.3% and the rise of 0.1% in February).

At the beginning of this month RBA lowered the key interest rate for the first time since June 2015. The rate was lowered to the level of 1.75%, causing the fall of the AUD. The pair AUD/USD lost over 180 points on that day and volatility amounted over 230 points.

According to the Bank, Australian economy is rising at a slower pace this year compared to 2015. Recent labor market indicators showed mixed situation. RBA stated that strengthening in the AUD may impede improvements in the country’s economy. However, some economists believe that the Australian dollar can soon recover and in order to prevent the rise in the AUD, it might be required to reduce the key interest rate once again.

Economists think that recent rise in the AUD may worry not only exporters, at the same time it may boost service sector in particular tourism and education.

On Friday at 02:30 (GMT+2) RBA will give forecast of economic growth, inflation and labor market.

It is likely that inflation forecast will be revised down after the release of the data on annual base inflation, which amounted to 1.7% against the forecast of 2.0% and the rise of 2.1% a quarter earlier. Therefore, the rate can be lowered once again this year, which will bring downside risks for the Australian currency.

AUD/USD: the rate can be decreased once again.  Fundamental analysis of 05.05.2016.




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