It has been announced this morning that Glenn Stevens the head of the Reserve Bank of Australia is to step down from his position. He is to be replaced by Deputy Governor Philip Lowe. It will be interesting to see how Lowe handles his new role as Stevens was renowned for jawboning (attempting to talk his way in to changing the value of a currency) as apposed to changing monetary policy. Lowe could be different.
Having said that, there has been a rate drop earlier in the week by the RBA rather than the usual jawboning, Interest rates dropped from 2% to 1.75%. This was done in an attempt to make raw materials cheaper and therefore more attractive to China, upon whom Australia are heavily reliant upon for trade. However I do not think it has had the impact the RBA expected so it wouldn’t surprise me to see further rate drops later in the year.
The uncertainty surrounding the EU referendum is holding back any significant advance for Sterling against the Aussie, after briefly rising into the mid 1.90s after poor UK manufacturing and construction data we have seen GBP/AUD move back into the 1.93s. We have seen positive import/export,retail and house sales figures for Australia overnight which has helped solidify current buoyancy levels. There has also been poor China service figures which could leave the RBA feeling very frustrated. This could cause further jawboning frrom Stevens at 00.30 tonight at the monetary policy meeting where he will attempt to weaken the AUD.
If I was an Aussie seller I would be looking to take advantage of current levels, I think the the UK could well remain in the EU in which case we will see GBP/AUD back above 2.00.
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