Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will AUD/USD Selling Continue?

Currencies / Austrailia Jul 18, 2016 - 09:27 AM GMT

By: Richard_Cox

Currencies Currency markets have seen some interesting moves over the last few weeks and one of the better trading setups can now be seen in the AUD/USD.  These scenarios have come largely as a result of recent developments within the central bank. 

The Reserve Bank of Australia (RBA) recently announced that it would be willing to take extensive and unorthodox measures to right the economy, if the need arose. The current interest rate is 1.75%. If this turned out to be the case and the RBA opted to decrease the base interest rate to 1%, then options like government bond-buying would be likely considered. Such a measure would likely reduce the value of the Australian Dollar, which is presently trading near 0.76 USD.


Historically Low Rates

In spite of such a low cash rate (or interest rate), the RBA may well consider a rate cut in August 2016. This is because of Australia’s low inflation rate. If the country maintains an inflation rate close to the current 1.3%, then the RBA will have plenty of scope for reducing the interest rate in the next few months.

Another factor that might prompt a rate cut is the job market scenario. Unemployment went up to 5.8% in June, with full-time jobs faring slightly better than part-time work. Growth in unemployment indicates sluggish wage increase. The current wage growth rate is 2.1%. A weak wage growth rate may trigger a rate cut in August.

Brexit Aftermath Continues

After Britain’s exit from the EU last month, RBA Assistant Governor Guy Debelle warned that a liquidity crunch was very likely. This would prompt the RBA to ease its monetary policy and cut the cash rate, maybe to 1.5%. The impact of Brexit on the Australian stock markets has also been significant. On June 24, 2016, a day after Britain’s historic referendum, the S&P/ASX 200 closed 3.17% lower. The loss incurred was close to $56bn. The AUD also depreciated by USD 3.4 to reach USD 73.3.  These are massive moves that have created price trends that still continue.

In other developments, RBA’s Head of Financial Stability, Luci Ellis, stated that there would be little impact on the economy if Australia’s credit rating was downgraded. This was after credit rating agency Moody’s warned that the current economic turmoil might put pressure on the country’s credit rating. At another conference, Dr. Ellis also said that there was great need for an international framework for lending standards.

The RBA’s last meeting was held on July 5, 2016. The minutes of this meeting will be released on July 19, 2016. What the world is eagerly waiting to see is the stand the RBA has taken vis-à-vis domestic policies and cash rate cut. Once this occurs, markets will have key clues needed in order to know whether or not to increase short positions in the AUD/USD.

By Richard Cox

© 2016 Richard Cox - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in