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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

Why isn’t the Australian dollar rallying more?

A dovish US Federal Reserve, soaring iron ore prices and better-than-expected inflation data should have given the AUD a shot in the arm, given the Aussie was last year’s worst-performing major currency. The main reason the currency hasn’t pushed higher lies in the current doubts over the RBA’s next rate move given signs of a domestic slowdown.

RBA board member Professor Ian Harper said last week that there isn’t much evidence of a negative wealth effect and that he expects the next move in rates to be upwards. This is despite traders currently agonising over further evidence of a weakening housing market, more out of cycle increases in mortgage rates, the impact of the US-China trade war and worsening business conditions. The market has priced out any chance of a hike this year, showing around a 55% probability of a rate cut by December.

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Source: Rural Bank

 

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