The Australian dollar is trading above 0.78, and showing a lot of strength despite evidence mounting against the pair.
With the rate decision coming next week, is there a sell opportunity?
The governor of the Reserve Bank of Australia, Glenn Stevens, mentioned 0.75 as a target for the pair. However, we still haven’t seen that.
In recent days, we had positive news from China: the HSBC manufacturing PMI rose above the critical 50 points line. But apart from that, news from Australia hasn’t been that positive: unemployment is on the rise and more recently, capital investment badly disappointed.
If the RBA looks not to the immediate term but a bit further down the road, this indicator of investment – future growth, is not too promising.
And if we look at the other side of the equation, to the US, solid inflation data lifted the greenback across the board. The Aussie did bow to this strength, but never really collapsed.
Various banks are changing their forecasts to another rate cut in Australia: from 2.25% to 2% – a new record low and a usage of the tools awaiting in the RBA’s shed. Contrary to many central banks, this one has room for easing.
Is a cut already priced in? We don’t think so. The kick lower could come from a combination of a cut and hints about further moves.
What do you think?
More: AUD: Still Soon For A Rebound; stay Short – Credit Agricole
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