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Australia
Over the past few days the Australian Dollar has benefited from some positive sentiment, rallying the AUD across the board to reach to reach an eight week high of 0.7010 against the greenback. This week’s Reserve Bank of Australia is the main event on the Australian economic calendar publishing today at 4.30pm NZT. Market analysts seem to be split as to if Lowe will cut or keep the cash rate at its historical low of 1.25%. Certainly markets have had plenty of reasons to expect a cut but we are not so sure. The main RBA’s communication around employment has been clear with recent data showing a rise to 5.2% alarming analysts with the RBA looking for improvements to around 4.5%. Lowe said recently the June cut wouldn’t be enough to shift the current growth path with a cut today perhaps already been decided weeks ago. If we see a cut this will take the cash rate to 1.0% – fast running out of room for further cuts if the economy really turns pear shaped. On the flip side, a pause will allow for a more gradual cutting cycle, however with domestic and global growth forecasts to remain slow we will get ongoing debate as to further cuts, which could possibly lead to the RBA introducing unconventional monetary measures such as quantitative easing. Building Approvals and Retail Sales print later in the week and could shift the AUD.
New Zealand
the New Zealand Dollar has continued to push higher, earning the tag of most improved player of the week, with it outperformed all major currencies. With risk markets improving the kiwi gained to 72.65 or 2.5% against the safe haven Japanese Yen and 2% in the US Dollar ahead of the Friday close. This week’s economic docket is light with only (NZIER) NZ Institute of Economic Research – Business Confidence the focus. That survey was released this morning and it printed at a 9 year low. This makes another interest rate cut at next month’s RBNZ meeting almost certain. In this environment the NZD should struggle to make further significant gains. US and Chinese officials look to have finally shaken hands at the G20 meeting over the weekend with Trump agreeing to halt a further trade war escalation by re kindling positive negotiations. The Global Dairy Auctions are Wednesday with projections we could get a similar poor result to last fortnight (-3.8%) on the index. Read more