WHAT NEXT FOR RBA?
The Reserve Bank of Australia increased the cash rate by 25 basis points on Tuesday to 4%, marking the fourth rise in six months amd lifting the benchmark rate 100 basis points from the low of 3% seen in April 2009 when the central bank made its last cut. However, the RBA's decision to keep rates steady in February surprised markets and although Tuesday's move was widely expected, it seems that the central bank will now be likely to slow the pace of monetary tightening and take each decision on a case-by-case basis, as the last meeting minutes suggested. Interest rates are still way off the peak of 7.25% (March 2008) and some analysts are looking for the RBA to bring rates up to 5% by 2010 year-end.
LATEST ECONOMIC DATA
Today's fourth-quarter GDP figures came largely in line with expectations with the annualised rate slightly higher than the consensus forecast (2.7% versus 2.4%), but the recent GDP data has been described by the central bank has being around trend and hence did not provide much of an upside shock to the markets. The upbeat growth figures not only reflect the strong labour markets in Australia (the January figure of +52,000 represented the fifth consecutive month of solid gains and the unemployment rate dropped to its lowest in 11 months at 5.3%) but also the effect of government stimulus on investment and household spending, meaning that the pace of growth in the first and second quarters of 2010 may be harder to gauge, especially since some of the investment is tied to external demand from countries like China (which is attempting to cool its economy's rapid growth).
TECHNICAL AND FUNDAMENTAL OUTLOOK FOR THE AUSSIE
The Australian Dollar (aud/usd) is up around 0.7% for the year, having rebounded to the 0.9000 level after the correction from the November 2009 peak of 0.9406 push it down to 0.8578. This commodity currency has held up well compared to the euro and sterling, and looking forward, from a fundamental point of view, the increasing yield differential (eurozone rates are currently 1% while rates in the U.K. and U.S. are 0.5% and 0.25% respecitvely) for the aussie puts it in an advantage and see the aussie re-test the 2009 high of 0.9406 against the greenback with potential in the long term for a visit of the 2008 top of 0.9851, especially if more interest rate hikes are seen. The risk on the downside will increase on a breach of the support at 0.8578, with an intermediate fibonacci retracement level found at 0.8353 ahead of a chart support at 0.8156.
Imperialfxonline
For comments and feedback, please email research@imperialfxonline.com
The Reserve Bank of Australia increased the cash rate by 25 basis points on Tuesday to 4%, marking the fourth rise in six months amd lifting the benchmark rate 100 basis points from the low of 3% seen in April 2009 when the central bank made its last cut. However, the RBA's decision to keep rates steady in February surprised markets and although Tuesday's move was widely expected, it seems that the central bank will now be likely to slow the pace of monetary tightening and take each decision on a case-by-case basis, as the last meeting minutes suggested. Interest rates are still way off the peak of 7.25% (March 2008) and some analysts are looking for the RBA to bring rates up to 5% by 2010 year-end.
LATEST ECONOMIC DATA
Today's fourth-quarter GDP figures came largely in line with expectations with the annualised rate slightly higher than the consensus forecast (2.7% versus 2.4%), but the recent GDP data has been described by the central bank has being around trend and hence did not provide much of an upside shock to the markets. The upbeat growth figures not only reflect the strong labour markets in Australia (the January figure of +52,000 represented the fifth consecutive month of solid gains and the unemployment rate dropped to its lowest in 11 months at 5.3%) but also the effect of government stimulus on investment and household spending, meaning that the pace of growth in the first and second quarters of 2010 may be harder to gauge, especially since some of the investment is tied to external demand from countries like China (which is attempting to cool its economy's rapid growth).
TECHNICAL AND FUNDAMENTAL OUTLOOK FOR THE AUSSIE
The Australian Dollar (aud/usd) is up around 0.7% for the year, having rebounded to the 0.9000 level after the correction from the November 2009 peak of 0.9406 push it down to 0.8578. This commodity currency has held up well compared to the euro and sterling, and looking forward, from a fundamental point of view, the increasing yield differential (eurozone rates are currently 1% while rates in the U.K. and U.S. are 0.5% and 0.25% respecitvely) for the aussie puts it in an advantage and see the aussie re-test the 2009 high of 0.9406 against the greenback with potential in the long term for a visit of the 2008 top of 0.9851, especially if more interest rate hikes are seen. The risk on the downside will increase on a breach of the support at 0.8578, with an intermediate fibonacci retracement level found at 0.8353 ahead of a chart support at 0.8156.
Imperialfxonline
For comments and feedback, please email research@imperialfxonline.com