The Aussie dollar firmed slightly yesterday after some weakness on Tuesday after the Reserve Bank squashed speculation that interest rates may rise sooner than later, suggesting that later is more likely. Rhetoric not dissimilar for the Federal Reserve in the US, that being interest rates will remain low and accommodative for the foreseeable future. Outside of this the RBA did make reference to solid housing prices, improving business confidence and unemployment still below RBA’s target expectations, which were some positives.
This week we did see some data from China, of interest foreign currency reserves beat expectations rising to $3.95T which follows from positive Trade Balances last week. This is interesting as these reserves generally continue to be invested in offshore treasury markets, however will have little effect on exchange rates in the short-term. China also released GDP figures yesterday which beat expectations by 0.1% showing 7.4% growth year-on-year. Interestingly industrial production was weaker than expectations and retail sales beat, perhaps a subtle sign that China’s growth is moving to domestic consumerism away from manufacturing.
Elsewhere on the inflation front New Zealand saw a weaker inflation reading for the first quarter yesterday, which may have been influenced by the recent NZD strength. The Kiwi sold off initially to close lower against most crosses for the day.
We have two bank holidays this weekend for Easter and markets will be closed Friday opening Monday. The Aussie dollar is definitely at an interesting level currently and arguments could probably be made for price direction to move in either direction in the short-term.