The RBA Minutes published overnight saw the Aussie hold its own with no major surprises however there were some points of interest for anyone with an FX requirement. Firstly they were slightly confused by the jump in inflation towards the end of last year and couldn’t attribute it to one main factor. It suggests the issue would only be temporary.
Secondly the Board also signalled they were comfortable with the level of the Aussie Dollar. Last year the RBA made very public comments about how concerned they were that a strong Aussie Dollar would damage growth and was one of the reasons they went on their cycle of interest rate cuts. The Aussie seems to have stabilised over the USD and whilst it has been pretty volatile against a rampant pound, this would suggest that the RBA don’t feel the need to artificially weaken the Aussie any further. This is good news for AUD sellers, but may mean that buyers want to consider purchasing soon.
Thirdly, they commented on the jobs market which has been a concern for many Australians. With unemployment rising, the RBA said this may be a lagging factor and not reflect recent improvements in the economy. Whilst I do not see any interest rate rises on the cards whilst the Aussie jobs market is soft, this view reinforces the idea that the RBA are slightly less concerned than they were 6 months ago about the economy.
Finally, and following on from the other points, the RBA have shifted their rate stance to neutral suggesting they see a period of stability in the near term. This could spell the end of the drastic swings we have seen for the Aussie, but should certainly mean it doesn’t slump much further and may even claw some ground back. This wait and see approach as they digest how the economy fares should mean a quiet period until May.
In the UK inflation was on the lower side of forecasts which saw the pound wobble slightly against the AUD, but given the proximity to last week’s Quarterly Inflation Report, I don’t think there were any great surprises here. More interesting will be the Bank of England Minutes and unemployment figures tomorrow at 9.30 UK time. At some point a Board member may vote for an interest rate hike and put the cat among the pigeons with regards to interest rate forecasts. Whilst I don’t think it will happen tomorrow it is a possibility to guard against. In my mind jobs figures for the UK have improved too quickly to be sustainable and probably have a lot to do with part time or temporary contracts, so again this could be a concern for anyone going from GBP to AUD.
Add to that the retail figures due on Thursday morning and the risk they may have been hampered by the recent flooding and there are potential down side risks to sterling this week. The US Fed Minutes may cause some volatility should they throw up any surprises, but my view would be if you need to buy Aussie then the current levels represent fair value in the short term. If you have a currency transfer to make and would like some assistance, please feel free to email Colm at [email protected] or call me on 0044 1494 787 478