AUD/USD Daily Fundamental Analysis for April 29, 2011

The Australian dollar rose sharply for three days in a row against the US dollar, while it strengthened to record a new multi decades versus the greenback at 1.0945 for the first time since it was freely floated, on expectations the RBA will increase the rates by 25 basis points during the next meeting to curb inflation.

Australian fundamental paves the way for the Reserve Bank of Australia to increase interest rates after the producer price index accelerated more than expected during the first three months of the year due to the increases in cost for petroleum refining and electricity, gas and water bills.

Moreover, the consumer price in Australia accelerated in the first quarter of the year, the fastest pace in five year, after the natural disasters that hit the nation on January and February, boosted food prices along with escalating violence in the Middle East helped fuel bills increase.

On the other hand, the demand for Aussie has increase during the recent days as the Federal Reserve’s pledged to keep interest rates near zero to stimulate growth that spurred investors to buy higher-yielding currencies.

While the Fed is being perceived as very dovish, rates are likely to stay low for a long time.

We can see that the Aussie will continue its upside movement versus the majors due to the fundamental pressures on the AUD to increase and to achieve new records in the upcoming period.

On Friday, the Australian will finish the week without any economic data, but the world’s largest economy is to release the Income Report for March at 12:30 GMT. Expectations indicate income to rise to 0.4% from 0.3% while spending will decline to 0.5% from 0.7%. Core PCE is expected with a drop on the month to 0.1% from 0.2% and steady on the year at 0.9%.

Furthermore, the world’s largest economy is to release the Chicago PMI for April at 13:45 GMT and expected to slow to 68.2 from 70.6. The US University of Michigan confidence final reading for the month of April is due at 13:55 GMT and expected with an upside revision to 70.0 from 69.6.

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