Fundamental Forecast for Australian Dollar: Bearish
On the domestic front, the spotlight is on a policy announcement from the Reserve Bank of
A dovish tone in minutes from May's meeting undermined speculation about forthcoming interest rate hikes, sending the currency lower. Australian economic data has increasingly underperformed relative to market expectations since then, suggesting
Meanwhile, GDP figures are set to show the pace of output growth accelerated in the first quarter and
Sizing up the macro landscape, a critical mass of high-profile event risk informing the outlook on Federal Reserve policy looms ahead. As we've discussed previously, the fate of the FOMC's effort to "taper" QE asset purchases with an eye to end the program this year - paving the way for interest rate hikes - has been a formative catalyst for the markets this year.
While last week's US GDP data revealed more dismal first-quarter performance than was previously expected,
Manufacturing- and service-sector ISM figures, the Fed's Beige Book survey of regional economic conditions and the obsessively monitored Nonfarm Payrolls report are all due to cross the wires in the coming days. Continuation of the supportive trend in US news-flow may help scatter any lingering doubts about the approaching end of asset purchases and subsequent tightening. That may narrow the Aussie's perceived yield advantage and drive broader risk aversion, all of which bodes ill for the currency. -IS