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    RBA eases inflation outlook, while markets await U.S. jobs report

    The Australian dollar fell during the Asian session today, following the Reserve Bank of Australia’s decision to lower its inflation outlook in its Statement on Monetary Policy.
    The Aussie fell 0.84% against the dollar at 0.7403, while the greenback fell 0.17% against the yen to 107.08. The U.S. dollar index ticked up 0.01% 93.74.

    The Reserve Bank of Australia forecasted that underlying inflation will remain below the 2-3% target until mid-2018, reinforcing the view that rates could be cut again to 1.5%. The RBA previously forecasted that inflation would be 2.0% in 2016 and around 2.5% in 2017. The new downward revision prompted for a 1.5% underlying inflation in the second quarter and below 2% next year. Economists expect that Tuesday’s rate cut to 1.75% will probably be followed by another one in August.
    Separately, AIG construction index in Australia ticked up to 50.8 in April, entering a growth territory, from a previous reading of 45.2, marking that activity in residential construction is easing from 2015 record levels.

    Japanese markets re-opened on Friday, as the Golden Week holiday came to an end with the focus turned on whether government officials will intervene to slow the yen’s appreciation.

    Overnight, the greenback edged higher against its major peers for a third straight day, as traders closed out trades against the dollar ahead of today’s U.S. non-farm payrolls report.
    On Thursday, the U.S. Department of Labour reported that the number of individuals filing for unemployment benefits in the week ending April 29th rose by 17,000 to 274,000, as opposed to previous week’s total of 257,000. Economists had expected jobless claims to increase by 3,000 to 260,000.
    The euro dropped 0.72% against the greenback to 1.1403. The dollar remained unchanged against the sterling and was higher against the Swiss franc, with GBP/USD at 1.4485 and USD/CHF jumping 0.98% to 0.9670.
    The British pound was under pressure as the Markit research group reported that its U.K. services PMI fell to 52.3 last month from 53.7 in March, below expectations for a 53.5 rise. This was the lowest level since February 2013. The report followed other statistics on the manufacturing and construction sectors earlier in the week, signalling slowing growth at the beginning of the second quarter.
    Meanwhile, the Japanese yen weakened after Japan Prime Minister Shinzo Abe commented that the central bank is poised to take action against a stronger yen.
    All eyes today are on the U.S. non-farm payrolls report due later in the day. Analysts expect U.S. employers to have added 202,000 new employees in April, following a 215,000 increase a month before, with the jobless rate being at 5.0 percent. In case that the report does not mark a higher wage growth, in combination with deteriorating global demand, the Federal Reserve will possible refrain from hiking rate at its June meeting.

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