Amid the turbulence impacting the Australian economy, there were whispers about the possibility of the Reserve Bank of Australia moving to cut rates by 25 basis points overnight to 2.00%. Despite calls from analysts and economists for lower rates, RBA Governor Stevens left the key rate on hold at 2.25% as crashing commodity prices deflate the outlook. While the Central Bank left the door open for further rate cuts, citing the below-trend growth, it has closed in on the preferred AUDUSD exchange rate of 0.7500. In the statement following the announcement, Governor Steven’s cited business capital expenditures as another source of weakness which has caused unemployment rates to trickle higher even though credit growth remains moderate. The one major risk that policymakers are keen to tackle is the growing bubble in the real estate sector, stoked in part by lower interest rates. AUDUSD has gained over 100 pips since the announcement, trading just shy of 0.7700.
Australia Stays the Course
Daily Analysis - 07/04/2015