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Despite solid business conditions and anticipated support from the RBA rate cut in May, business confidence appears to have weakened in the month, pushing the index further below average levels. The confidence index eased 2 points to +3 index points in May, which is its lowest level since August 2015. Uncertainty over the upcoming election may have contributed to the fall, but a non-uniform result across industries suggests other factors are at play. Nevertheless, it is encouraging that confidence has remained above zero continuously since mid-2003.
Confidence was positive (or neutral) for most industries outside of mining and transport, although changes in confidence over May varied notably. The largest gains occurred in construction and wholesale (both up 6), followed by mining (up 2). In contrast, manufacturing (down 11) and transport (down 7) posted notable declines – a possible reflection of growing costs as oil and petrol prices continue to gain momentum. In trend terms, construction (+12), manufacturing (+6) and personal services (+6) firms were the most confident. In contrast, mining confidence was still the lowest (-5) and is expected to remain weak.
 
Aussie is currently being traded few points above 0.7380 level. Pair is likely to find support around 0.7330 handle and resistance above 0.7450 level. Later today, in the US session, Retail Sales figures are scheduled for a release.

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