Talking points:

• Aussie Dollardipped slightly ahead of the RBA policy meeting on a disappointing trade balance reading

• ABS reports a trade surplus of $A731M down from $A1257M in February while economists expected $A1000M

• Declining surplus attributed to a 2% decline in exports while imports remained steady

The Australian Dollar saw a marginal drop against the Japanese Yen following a weaker-than-expected trade surplus figure, as markets awaited the upcoming RBA policy decision. The Australian Bureau of Statistics reported that the trade surplus had narrowed to $A731M from a revised $A1257M in February; the figure was below expectations calling for a trade surplus of $A1000M. The disappointing reading reflected a 2 percent decline in exports and compares with a trade deficit of $A636M in the same period last year.

The deterioration in the trade balance, in combination with a slew of recent soft economic data, may influence the RBA to reconsider its previously upbeat assessment of the economy. Previous policy statements have noted the persistent strength of the Australian Dollar and signs of a slowdown in the Chinese economy. The RBA is widely expected to maintain the cash rate at 2.50% at the upcoming meeting although markets will watch for hints that Governor Stevens may change the rate outlook. DailyFX Currency Analyst David Song mentionsthe RBA announcement as a potential catalyst for volatility in Aussie dollar pairs.

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AUDJPY (5min Chart) – May 6, 2014 | Created with FXCM Marketscope

original source

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