RBA minutes drag on market sentiment (Joshua Privett)

Increase in Risk Appetite Helps Support the Australian Dollar

No further rate cut announced but the RBA’s view of the Australian economy is still far from positive. They see the results from their change in monetary policy to be ‘unusually uncertain’ in Australian households. By slashing rates they hope to stimulate spending, yet the theory is failing to convert into any tangible reality.

Cutting rates has also been found to increase inflation. But this seems to be working in pockets, rather than generally easing the stress on the Australian economy. For example Sydney housing prices are rising at 3% per month. Setting individual policies for certain regions who are experiencing this will only exacerbate the issue, as businesses will move to areas of higher returns and simply concentrate the recovery in a single area. Which is why the current ‘wait and see’ attitude that was essentially put forwarded by the RBA has been met with a lack of confidence in the Australian Dollar.

This has presented further excellent buying opportunities for the AUD in the short-term. The election will surely drag rates back down the other way soon, and the AUD would likely be at 2.0 right now, if the election was not already dragging down on the value of Sterling. Contact me today on 01494 787 478 to discuss your current situation and how to navigate the next few months. jjp@currencies.co.uk