Overnight Glenn Stevens, The Head of the Reserve Bank of Australia (RBA) had a fairly bullish tone during his speech regarding the current state of the Australian economy. He stated financial markets are “dropping their bundle” but it is unclear whether volatility will hurt the Australian economy. He also said he could not provide an explanation as to why people were making knee jerk reactions to “latent issues” that had been present for some time. Clearly referring to China’s slowing growth.
Previous statements made by Stevens gave the impression that an interest rate drop could be on the cards in the near future, however last night he stated “With inflation unlikely to cause a problem by being too high over the next year or two, the board retains the flexibility to ease further , should that be helpful”. You can decipher his cryptic statement yourself, but I think that his words indicate that the probability of an interest rate drop short term is now more unlikely. Not good news for AUD buyers. This could well mean that current buoyancy levels between 2.01-2.06 will remain in place for longer than previously expected.
Key Data Releases for Next Week
Tuesday at 00.30 we will see the RBA Meetings Minutes. This will give a clear indication into future interest rate policy. So keep an eye on this announcement as it could cause movement on GBP/AUD.
On Thursday at 00.30 Australian unemployment figures are released and I predict a slight drop which could marginally strengthen the Aussie.
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