The minutes of the last meeting of the reserve Bank of Australia board
were out waiting for us this morning, having been released at just after
midnight GMT. The discussion seems to have centred on the idea that interest
rates are more or less where they want them to be at present. However, there
are a number of considerations, given that it is some weeks since the board
meeting took place and the Aussie has appreciated about three percentage points
in the meantime.
Inflation is on the rise, although they seem to expect that this is
temporary phenomenon. The real bugbear must be unemployment, which has also
increased. And then there is the housing market. One of the major factors in
the RBA’s decision not to increase interest rates has been the fear of a
property bubble. Now it would appear that one is underway anyway, fuelled, in
no small part, by an influx of capital for this purpose from China .
For us, this all means that pressure is building on the Australian
authorities to consider some means by which the value of the currency can be
reduced. Whether this will be confined to the talking down that was the main
tool used in the recent past, or whether there are more concrete measures to be
taken, remains to be seen. In the meantime we watch the charts.
Reports that might influence
the US dollar today
After the shortened session in the USA yesterday, when the Presidents
Day Federal holiday was observed, there are two reports that could have a
bearing on the movement of the US dollar exchange rate. These are the NY Fed “Empire State ”
Manufacturing index and the Wells Fargo / National Association of House
Builders (NAHB) housing market index. While always of some importance, these
are not normally as closely watched as certain other measures, such as those
that deal with unemployment. However, they will have assumed an importance at
present because there is a question mark over the tentative recovery in the US economy that
was apparent at the end of last year and the start of the current one. This is
down to a number of weak Non Farm payrolls reports, less-than-stellar retail
sales and an apparent softness in manufacturing.
Many believe that these are related to the severe weather
conditions that much of the USA has been experiencing, and therefore represent a
temporary blip, but all market participants will be anxious to have
confirmation, or otherwise, that this is indeed the case.
Then there is the Consumer
Price Index in the UK , which
will have a bearing on the Pound Sterling, and the ZEW Survey report on
economic sentiment in Germany ,
which could impact the Euro, given that the German economy is by far the most
important one in the Euro zone.
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