Forex - AUD/USD weekly outlook: May 4 - 8

Investing.com - The Australian dollar declined against its U.S. counterpart on Friday, as traders readjusted their expectations on how soon the Federal Reserve might raise U.S. interest rates amid indications that the U.S. economy may be stabilizing after a recent bout of weakness.

AUD/USD hit 0.7804 on Friday, the pair's lowest level since April 27, before subsequently consolidating at 0.7844 by close of trade on Friday, down 0.78% for the day.

Despite Friday's losses, the pair tacked on 0.43%, the fourth straight weekly gain.

U.S. economic data on Friday showed that activity in the manufacturing sector was stable in April, after slowing in the five previous months, while consumer sentiment improved to its highest level since January last month.

On Thursday, weekly claims data showed that the number of Americans filing for jobless benefits fell to a 15-year low of 262,000 last week, fuelling optimism that the U.S. economy has turned a corner after a recent soft patch.

Data published Wednesday showed that the U.S. economy grew just 0.2% in the three months to March, slowing from 2.2% in the final quarter of 2014. It was the slowest rate of growth in a year.

The disappointing data prompted investors to push back expectations on the timing of an initial rate hike by the Federal Reserve to later this year from midyear.

But in its rate statement on Wednesday the Fed said recent indications of a slowdown in growth were probably due to “transitory factors.”

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report, for a fresh indication on the strength of the economic recovery.

Investors will also be focusing on the outcome of a policy meeting of the Reserve Bank of Australia on Tuesday, amid growing expectations for a rate cut.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, May 4

Australia is to publish data on building approvals.

China is to release revised private sector data on manufacturing activity. The Asian nation is Australia's largest export partner

Later in the day, the U.S. is to publish figures on factory orders.

Tuesday, May 5

Australia is to produce data on the trade balance, while the central bank is to announce its latest monetary policy decision and publish its rate statement.

Meanwhile, the U.S. is to release data on the trade balance and construction sector activity, while the Institute of Supply Management is to release a report on U.S. service sector activity.

Wednesday, May 6

Australia is to publish a report on retail sales, while China is to produce private sector activity on service sector growth.

The U.S. is to release its monthly ADP nonfarm payrolls report and later in the day Fed Chair Janet Yellen is to speak at an event in Washington DC.

Thursday, May 7

Australia is to produce its monthly employment report.

The U.S. is to publish the weekly report on initial jobless claims.

Friday, May 8

The Reserve Bank of Australia is to release its monetary policy statement.

The U.S. is to round up the week with what will be the closely watched government nonfarm payrolls report.