Australian Interest Rate Preview: Rate Expected To Stay At 2.5%
Littlefish FX | Feb 03, 2014 09:22AM ET
Interest rates are expected to stay on hold at 2.5% following the up-coming R.B.A. meeting on February the 4th.
December 2013, saw an unexpectedly high inflation figure and the effect of this may be seen in a reluctance of the ‘inflation centric’ R.B.A. to cut rates in the first quarter of 2014.
In addition to this there has been evidence to suggest that both consumer and housing sector activity has increased (housing finance total) by 1.7% in the last quarter of 2013).
On the other hand, rising unemployment may well compel the R.B.A. to cut rates later in 2014, however, the data pertaining to employment will have to be watched if we are to be forewarned.
I believe the AUS will be fairly flat all through 2014 and that the budget (May) will be accompanied by some significant austerity measures. It may well be that the R.B.A. will wait to gauge the effect of past rate cuts as their consequences spread throughout their economy, before making any rate changing decisions. The R.B.A.s current concern seems to be with maintaining a weak USD. However, some analysts believe that the rates have gone as low as they can and that late 2014 will see rates rise.
AUD/USD
Today the AUD took a dive from a high of 0.9712 down to 0.8858 before retracing to 0.9052 and then diving to a new low of 0.8678.
Unless the unexpected happens and R.B.A. changes rates, a channel may develop between (around) 0.8965 and 0.8683.
Resistance: 0.8855, 0.8967, 0.9052.
Support: 0.8678.
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