How will the Aussie fare with both US inflation tomorrow and Glenn Stevens speech tomorrow night? Sterling Aussie rates have enjoyed somewhat of a see-saw relationship over the previous few months pivoting above and below the early 1.80’s. Today the Aussie has been clawing ground back so depending on how strong the US figures are, and what comments Stevens makes, we could see quite a lot of volatility.
The RBA seem fairly set on holding interest rates as they are, but they are obviously still concerned about the strength of the AUD impacting on exports. There is always a danger that at some point the RBA will look to artificially weaken the currency either through selling fx reserves or some other form of intervention. If this is the case then there could be a sharp drop in the value of the currency- whilst I am not anticipating any action imminently it is still a concern.
The Bank of England minutes are also published tomorrow morning but I am not expecting any huge variation from this- I can’t see how any more members will have voted to raise interest rates given UK data has been tailing off lately and the Chief Economist for the BofE has expressed his concern over hiking rates too soon because the economic outlook presently is quite different from just 3 months ago. If anything there is probably more chance of one of the 2 who voted to hike changing their mind then another member joining them in the call to raise interest rates sooner. If this was the case we could see substantial GBP weakness but again I think this scenario is unlikely.
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