Weak global growth has been affecting Australia negatively. The fall in commodity prices has largely caused the decline in global inflation expectations. Some commodities, such as grain, have fallen in price due to over production. However, precious metals, which are important to the Australian economy, have fallen drastically due to low demand and one of the reasons for this this is China’s slowdown in output. On a side note, two weeks ago the RBA held interest rates at 2.5% which has been kept constant for more than a year. This indicates that the RBA is playing the waiting game keeping their rate stable until the Fed raises its interest rate thereby making the Aussie dollar cheaper. With this recent turmoil, the RBA may have to wait longer as the Fed will be cautiously monitoring the markets. Any damaging movements may mean that the Fed will push back market expectations of the rate hike (Q2 2015). However, the RBA may lower interest rates if this occurs, to achieve a cheaper Aussie dollar.
Recommended Content
Editors’ Picks
EUR/USD holds above 1.0750 to start the week
EUR/USD trades in positive territory above 1.0750 in the European session on Monday. The US Dollar struggles to find demand following Friday's disappointing labor market data and helps the pair hold its ground.
GBP/USD edges higher toward 1.2600
Following Friday's volatile action, GBP/USD pushes higher toward 1.2600 on Monday. Soft April jobs report from the US and the modest improvement seen in risk mood make it difficult for the US Dollar to gather strength.
Gold rebounds above $2,310 after downbeat NFP data, eyes on Fedspeak
Gold price trades in positive territory above $2,310 after closing the previous week in the red. The weaker-than-expected US employment data have boosted the odds of a September Fed rate cut, hurting the USD and helping XAU/USD find support.
Addressing the crypto investor dilemma: To invest or not? Premium
Bitcoin price trades around $63,000 with no directional bias. The consolidation has pushed crypto investors into a state of uncertainty. Investors can expect a bullish directional bias above $70,000 and a bearish one below $50,000.
Week ahead: BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.