The Australian Dollar strengthened overnight after Spain announced austerity measures in their 2013 budget. In the short term this has diverted the attention of the RBA and its potential interest rate cut next week. Accoridng to some polls including a Dow Jones survey of 15 economists only 4 thought their would be a rate cut but for the majority they were sitting on the fence. I’ll personally be a bit more bold and suggest that the RBA will cut interest rates as I think it could provide the stimulus needed to boost the economy outside of the mining region. Some economists think it could be November but I think there is a strong possibility that rates will be cut providing those needing to buy Australian Dollars with a good opportunity is that’s the case.
With the recent profit taking the market is staying in quite a tight range in anticipation of what may or may not happen next week. Later today the Spanish banking stress tests are due out so if they’re better than expected then we could see a short term strengthening of the AUD as investors increase risk appetite.
China also helped to keep the AUD strong as they pumped in 365bn Yaun into the money markets to boost their economy Demand from China for iron ore and coal and other commodities has driven the Australian economy in recent times and if further stimulus carries on in China this could keep the AUD strong.
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