Australia Focus : RBA Time

AUD UPDATE

The only positive this week has been coal and the ASX.

Government bonds continued to fly towards record low yields and RBA watcher McCrann said that the RBA “will most certainly cut rates at its first meeting back for the year”.

The week closed with a big pull back for oil after hitting a record 8 year low of $43.58 on Friday and bouncing up 8% in a hurry, within the same night.

There will be hope into February.

CENTRAL BANK TARGETED RATE CURRENT RATE LAST CHANGE AMOUNT OF CHANGE REAL RATE NEXT MEETING
AUSTRALIA CASH TARGET RATE 2.50% 6-Aug-13 -0.25% 0.80% 2-Feb-15

 

It is getting difficult to see how carry of 2.5% will help solve currency losses of 4% after just 1 month into 2015.

The travesty cannot be addressed because Australia is still in positive real interest rate territory even with her CPI on a downtrend.

AUD CPI RBA CASH TARGET RATE

Thus it is hard to see how they can avoid a rate cut this time round, not when even dear old Singapore reduced the need for additional currency strength.

That left me with AUDSGD at 1.045 (as I said last week) which is holding well, bouncing back up to 1.05 and it remains to be seen what language the RBA will be using in terms of future rate cuts to steer the course for the currency and China too, with 2014 growth of 7.4% the lowest in 2 decades and 2015 expected to deliver only 7% as PMI numbers today sinks to a contractionary 49.8, lowest in 28 months.

Time for RBA to exercise their clout or, lack of ?

Leaving you with the indicative bond prices.

aud bonds