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The Australian dollar suffered two RBA blows but the last word from the central bank does allow it to recover. Is there a sell opportunity here? The evidence mounts:

Here is their view, courtesy of eFXnews:

We view the overnight AUD rebound launched by the release of RBA minutes as providing a selling opportunity.  The board considered the fact there was no material change in the outlook for economic activity or the unemployment rate, but the outlook for inflation had been revised lower.

This revision was weighted against developments in the housing market, which showed that the potential risks to the housing market from lowering interest rates were less than a year earlier. Markets reduced RBA rate cut expectations accordingly with a June and probably a July rate cut off the agenda for now.

However,  a partial RBA repricing does not convert us into AUD bulls as deflationary pressure from overcapacity-running Asian economies remains in place.

China’s continued rise of land prices, reaching CNY30-40k per square metre in East China’s Nanjing and Suzhou as reported this morning, suggests the recent monetary easing translating into speculative activity, but doing little to support the broad economy. Price bubbles increase deflationary risks in the medium term.

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