AUD/USD Weekly Forecast - 27 April

Friday, Apr 24 2015

Events that marked the week:

On Tuesday, from Australia, RBA Meeting Minutes were released. RBA Meeting Minutes showed that Board members were once again considering rate cut before deciding to leave interest rates unchanged. In assessing the operation of the cash flow channel in particular, they noted the responsiveness of borrowers and savers to changes in interest rates and asset prices was unusually uncertain in a world of very low interest rates and high household leverage," the RBA said. "Members also saw advantages in receiving more data, including on inflation, to assess whether or not the economy was on previously forecast path and allowing more time for the economy to respond to the reduction in the cash rate earlier in the year," the RBA said.

At the meeting, the RBA also discussed the unusual trading in the Australian dollar that occurred in the period immediately prior to the announcement of the board's decisions in both February and March. "Members noted that the illiquid conditions that existed in the foreign exchange market at that time meant that small trades could move the price by relatively large amounts, and that once such movements occurred it would be highly likely that algorithmic trading strategies would exacerbate such movements, particularly given the illiquid environment. Moreover, the occurrence of these movements meant that liquidity was likely to decline further as more liquidity providers pulled back from the market during this window," the RBA said.

Wednesday's session was marked by CPI figures. Australian CPI rose by 0.2% in the March quarter 2015, compared with a rise of 0.2% in the December quarter 2014. This was in line with market forecasts. It rose 1.3% through the year to the March quarter 2015, compared with a rise of 1.7% through the year to the December quarter 2014.Trimmed Mean CPI rose by 0.6%, also in line with market expectations.

From China, on Thursday, Manufacturing PMI figures were released. Flash China Manufacturing PMI fell to 49.2 in April from 49.6 in March, what is a one-year low. Analysts were anticipating no change this month. Production increased only marginally, while total new business declined for the second successive month. Relatively weak demand conditions were also highlighted by stronger deflationary pressures in the sector, with both input and output prices falling at faster rates. Meanwhile, job shedding across manufacturing firms was recorded for the eighteenth month in a row. On a brighter note, demand from overseas improved in April, with new export work rising for the first time in three months.

Also, from Australia, NAB Quarter Business Confidence figures were released. Business confidence fell to zero in the March quarter while business conditions slid from five to two points, according to National Australia Bank's quarterly business survey on Thursday. The discrepancy could be due to timing, NAB chief economist Alan Oster says, with the monthly survey taken more recently than the quarterly one.

This week market will be looking at:

Import Prices (Thursday 3:30)

China's Manufacturing PMI/Non-Manufacturing PMI (Friday 3:00)

PPI (Friday 3:30)

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