The news as far as the aussie dollar has been concerned this
week has been remarkably positive. We have to hold our hands up and say that we
were expecting the RBA to cut its 3.25% interest rate again at its meeting this
week, though we did warn that it was an incredibly close call. On top of this,
data revealed that 10.7 thousand jobs were added to the Australian labour market,
which was away ahead of expectation. The aussie unemployment rate also
unexpectedly remained 5.4%.
What followed all this was last night’s RBA monetary policy
statement. In it, the RBA warned that the aussie mining boom will peak earlier
and at a lower level than has previously been thought. It was previously thought
that the mining boom would peak at 9.0% of GDP, expectations are that it will
now peak at 8.0%. The central bank also complained further about the strength of
the Australian dollar (change the record!)and proceeded to downgrade aussie GDP
projections for this year from around 3.00% to around 2.75%, though admittedly we
might have expected this downgrade to be more drastic.
The RBA stated that the current interest rate is appropriate
and that past rate cuts are still filtering through and benefiting the Australian
economy. The statement also sounded confident that the Chinese economy has
stabilised, anticipating a gradual recovery in growth from here.
We suspect that Governor Stevens may be getting ahead of
himself with respect to Chinese growth and Australian growth. While this week’s
strong aussie jobs data may see the RBA delay a rate cut in December, we’d be
surprised if we had to wait past January for another cut.
Richard Driver,
Currency Analyst
Caxton FX
