Reluctance to change Monetary Policy could cause AUD weakness.
In the early hours we saw the Reserve Bank of Australian (RBA) Interest Rate Decision. Rates remained unchanged at 1.5%, which was no surprise considering current economic conditions down under. Retail Sales data came in just before the decision and was some way below expectations. There was predicted to be a rise from – 0.5% to 0.4%, but there was only an increase to 0.1% which caused the Aussie to suffer.
The Australian Dollar has been a favourite with investors due to its offer of relatively high returns, however the US Dollar now seems to be gaining preference as it offers the same returns and is also considered a safe haven currency.
The Federal Reserve also has a far more aggressive forecast in terms of hiking rates and it has been rumoured we could see as many as three more hikes in 2018 which does not bode well for the Australian Dollar.
Living costs in high wage growth areas are causing Australians to spend there hard earned money on necessities rather than luxury goods and services. There needs to be an increase in average wage growth before a rate hike can be justified. I am doubtful of any rate hikes by the RBA until 2019.
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