Was reported yesterday that in the RBA minutes they mentioned a 'neutral rate' of 3.5%. People took this to mean interest rate rising toward this level. Hence strong move in A$ yesterday afternoon. Importantly, this was interpretation rather than the RBA actually stating their intention was to move toward 3.5%.
I see recent news to be somewhat of a perfect concoction for a stronger Australian dollar. Iron ore bounce, employment strong and last retail sales strong. All this at the time of US$ weakness against most currencies. The medium to longer term trend in key local economic data is still weak. Employment data is so volatile that I'm surprised anyone takes it seriously. Retail sales had one good month but the trend is firmly down. Iron ore is still massively over supplied. Home loan interest rates rising, for investors at least (imagine how well the most indebted households in the world cope if they rose another 2% !).
My view for a while has been gold>US$>A$. No reason to change that view based on 6 weeks of data and the words of people who have been perpetually useless in terms of predicting economic movements. Hence why I think this is a good buying opportunity in the local gold miners.
SBM Price at posting:
$2.47 Sentiment: Buy Disclosure: Held
(20min delay)
