The AUD has been under pressure to move below the .75 mark versus the USD but has resisted so far to stay below.
Bankers and Investors are speculating again that the RBA and chief Glenn Stevens have to make the move given declining yield curves to reduce interest rate lower.
Minister Joe Hockey has also added his 5 cents with outlandish remarks like the introduction of an increased GST or deposit taxes on savings.
We beg to differ to popular believe that the RBA is ready to cut further. To see how the market has caught on: Prices of imported items have not significantly altered for the Australian consumer so far and benefits from re-priced loan books are yet to have a real impact on consumer spending and being realised by mortgagees.
The only difference that Australia has seen so far is the influx of additional funding in the housing sector and foreign investors are cashing in on the discounted dollar. A effect that Joe Hockey has been meaning to strangle with the introduction of “non-resident purchase tax” on second and subsequent property purchases by foreign investors.
Joe Hockey is not likely to play that game of poker with China just yet however.
We believe that the southbound train of the AUD is near a short term low and fear that only long options exists as the AUD approaches .75 against the USD.
Recent confidence in Europe is also going to play down the USD and lead to additional bullish spin on the AUD.
Considering how long the RBA took to cut the interest rate 2 months ago we remain confident that the rate cut is too soon as the RBA is not a market maker or influencer but observer and reactor.