AUD/USD continued its recovery and extended the gains. It is now above the 0.92 level, after making a gradual upwards move.
The Aussie rode on the relatively solid meeting minutes from the RBA and the announcement that the carbon tax would be abolished in favor of a different scheme. Another sign that China is letting go of aggressive growth targets in favor of growth were ignored.
The Reserve Bank of Australia sees current policy as appropriate. And while the inflation outlook leaves the door open for more easing, the drop in the value of the Australian dollar could add to inflation, according to the central bank. And, the Aussie could continue falling.
On the fiscal front, the new PM Kevin Rudd continues making headlines ahead of the elections in Australia. He announced that the carbon tax will be scrapped in favor of the emissions trading scheme, beginning in July 2014. This would be countered with a series of budget cuts. The move was well received by the markets.
The bad news came from China: the China Securities Journal reported that China could accept slower growth in order to get “structural adjustment”. The new Chinese authorities are cracking down on corruption and extreme bank lending. They have allowed a credit crunch last month and took their time before intervening in order to show that dangerous financial moves will not be cushioned by the government.
And, yet another institution cut China’s growth forecasts: to 7.7% in 2013 and 7.5% in 2014. China reported a growth rate of 7.5% in Q2 2013. China could possibly tolerate a growth rate of 7%.
Lower Chinese growth doesn’t bode well for Australia. Nevertheless, the Aussie ignored the bad Chinese news and continued advancing. The test of 0.90 seen on Friday seems like a distant memory.
AUD/USD was struggling under 0.91 and is now above 0.92. For more levels, events and analysis, see the AUDUSD forecast.
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