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Aussie Dollar Forecast brought to you by TransGlobal payment solutions…
Aussie Dollar Forecast brought to you by TransGlobal payment solutions…
RBA Governor Stevens has stated that the world economy appears to still be very weak even though the credit markets have improved over the last few months. Demand has not weakened as much as in other countries and the economy remains strong while inflation is likely to decline over time. By historical standards, markets and mortgage rates are at very low levels; this combined with the substantial fiscal initiatives from the Government should provide support to domestic demand over the coming period.
Their decision to keep the interest rate on hold suggests that the RBA members are confident that the economy will return to a growth phase in the second part of the year. Until now, the Australian economy was the least affected by the credit crisis, having the biggest growth forecast
So on the face of it; the Aussie Dollar should be able to hold its recent gains thanks to a spike in risk appetite, hopes that the worst the global economy has passed and talk domestic interest rates have bottomed.
The Australian dollar seemed to be running ahead of pollsters, jumping to a seven-month high of 75.63 U.S. cents last week, as jobs data proved surprisingly strong. Coupled with a surge in retail sales, the jobs figures stirred speculation there may be no further rate cuts in the coming six months, and even encouraged talk that 3.0 percent might prove the low point for the cash rate.
If the Australian economy continues to weather the global financial crisis and recession better than the major economies, as is anticipated, this will be supportive of the Australian dollar The RBA won’t need to cut official interest rates to the rock bottom zero or near-zero levels in place in the U.S., Japan and United Kingdom.
That should see more yield-hungry investors flocking to Australian assets, which command amongst the highest yields in the industrialised world. The RBA have noted that China was starting to recover, boding well for the Australian economy. China is Australia’s biggest trading partner and a huge buyer of the country’s industrial resources.
Lately, data from Asia and the United States has sparked talk that the global economy may be on path to recovery. The Australian dollar is considered to be a barometer towards global growth, reflecting its status as a major commodity exporter.
Hopes that the global economy is on the mend has sparked demand for commodity linked-currencies like the Aussie, the New Zealand and the Canadian dollars in the past few weeks. The Aussie has gained more than 4 percent since April 28 against the dollar while the CRB commodities index has jumped 6.8 percent during the same period.
Australian Building Approvals Rise More Than expected
More ‘green shoots’ as the building approvals from Australia rose a seasonally adjusted 5.1 percent, month over month, and have risen for three months. The trend estimate for total dwellings approved rose 2.2 percent. Private sector homes rose 2.0 percent and other dwellings rose 2.1 percent. If the housing market is moving upwards then the ‘real’ economy is finding its feet…..
Summary
All in all a good positive outlook from the RBA and the figures certainly back them up. I don’t want to put a dampener on their optimistic view but it would be wise to keep in mind that the global economy is still very much struggling in the worst recession post WW2. Shock Central Bank announcements and unpredictable data is still a threat to all currency pairings.
Source: June Forecast polled by Reuters - Median rates from 42 Analysts
Forecasts 1 - Month 3 - Months 6 - Months 12 - Months
GBP/AUD 2.0512 2.0750 2.1020 2.1525
AUD/GBP 0.4875 0.4819 0.4757 0.4645
AUD/USD 0.7800 0.7700 0.7700 0.7800
Aussie Dollar Forecast brought to you by TransGlobal payment solutions… The Glass is Half Full Down Under!
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