RBA to keep interest rates on hold
Things do not bode well for the Australian Dollar at present. The Reserve Bank of Australia (RBA) have recently indicated that interest rates will be kept on hold for the foreseeable future. It was following Australian inflation data in the final quarter of 2017. There was a slight increase, but it did not meet the expectation of 2%. Some could deem this as positive, but the problem is due to the inconsistencies regionally.
Canberra, Melbourne and Sydney saw inflation hit over 2.1%, but if you look at Perth an area heavily involved in commodity exports inflation is struggling at 0.8%. This is definitely a cause for concern which is the reasoning behind keeping interest rates on hold.
The housing bubble created by those flocking to high wage growth areas is also a problem. The housing market remains strong in the east but is considerably down in the west according to the latest CPI figures.
With Australia highly dependent on raw material export to China it is important to keep an eye on Chinese data. We recently saw a fall in manufacturing data which has also caused Australian Dollar weakness.
GBP/AUD now sits above 1.75 which has been a resistance point of late. With the uncertainty surrounding Brexit talks if I was selling Sterling I would consider taking advantage of current levels. The last time we saw GBP/AUD near 1.80 there was a quick retraction possibly due to profit taking.
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If you would like my assistance I can be contacted at [email protected]. Thank you for reading. Daniel Johnson