Aussie strengthens as RBA keeps rates on hold

AUDGBP Drops Despite Hot Australian Inflation Release

We have seen the Aussie strengthen following the decision by the Royal Bank of Australia to keep interest rates on hold. It was widely expected they would cut rates and as such the Aussie weakened. This move has caused the Aussie to strengthen and underlines the ‘buy’ opportunity we highlighted to clients.

As important as interest rate decisions are, I still think the Greek debacle is the one to watch for! There is now 6 weeks to the day until Greece needs to find 14.4bn euros to pay its latest debt obligations. Good luck finding that under the mattress! The ongoing political deadlock is weakening the Euro but will affect risk aversion. Of course we know the Aussie’s strength is more fundamental but it will still in my opinion be the biggest mover of rates and probably the catalyst that causes a break from the 1.4620-1.4820 levels we have been trapped in for the last week.

Unfortunately I don’t think there is much more good news this week for anyone buying Aussie dollars as the prospect of further QE looms for the UK. I must say however that considering the recent impressive data for the pound we may not actually see any QE and as such the pound could find some strength. If I had to put my neck on the line I would say we probably won’t see any QE but that doesn’t mean you shouldn’t consider it. It is the unexpected that can cause market movements after all.

As the saying goes ‘Hope for the Best, Plan for the Worst’

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