It’s that time of the month again where the Reserve Bank of Australia led by Governor Glenn Stevens decides whether to raise interest rates, lower them or keep them on hold. Market consensus is for rates to remain on hold at 2.5% and in general these analysts (that are polled each and every month) are pretty spot on with their forecasts. What they don’t give insight on is the accompanying speech by Stevens where we would expect him to talk about what the future rate decisions will be and why.Past economic data can give us an indication as to which way they might be leaning, but we won’t truly know until the following speech by Glen Stevens.
Following on from Stevens Press Conference we have Chinese PMI OR Purchasing Manufacturing Services which is an indicator of the economic health of the Manufacturing sector in China. A number above 50 shows expansion in that sector and a reading below 50 shows contraction. Last month we had a reading of 52.4 which shows the Chinese manufacturing sector is still growing, albeit not at the same pace as it was during the mining boom.
Both of these announcements have the ability to increase the volatility in the Australian Dollar and move it (significantly) in one direction or the other. If you have Australian Dollars and are looking to transfer into another currency your ideal result would be an appreciation of the Aussie against whatever currency you may be looking to buy.
Across the Tasman in New Zealand we have the Unemployment rate and Employment change coming out tomorrow morning and forecasts are for the Unemployment rate to fall from 6% to 5.8%. The Kiwi economy has been a shining light of late and has recovered well from the 2008 GFC with a boom in Dairy, an improving housing market and positive migration. If we see a positive fall in Unemployment the Kiwi Dollar should strengthen against most of its peers, fuelling calls for a “parity party” later this year against the Aussie Dollar .