Two weeks ago investors in the Aussie Dollar were on the receiving end of a sweet surprise. The official unemployment rate dropped to 5.9%, smashing analysts’ expectations. That suggested the Reserve Bank of Australia’s latest easing cycle, which began about a year ago, might soon be ending.
But before you jump on the Aussie bandwagon, you need the right strategy.
Aussie Outlook Looking Brighter
The truth is that the whiff of optimism had been long overdue for the Aussie Dollar. Even before the unemployment data there had been tentative signs of stabilization in the Australian economy.
About two weeks ago I shifted the reader's attention to the upcoming rotation back into commodities and the commodities FX play, i.e. the Norwegian Krone and the Aussie Dollar. While I had initially predicted back in May the 2nd, the Norwegian Krone has instead rallied on the back of appetite for Oil and the general lackluster appeal of the dollar. But that was and is still not the case for the Aussie Dollar. It seems that investors in the Aussie dollar are waiting for some cue, some development that has yet to materialize. What is this development and what would be its likely impact?
Aussie Reality Check
Despite the Australian economy being in relatively fair shape and with inflation levels still higher than its western peers, the Reserve Bank of Australia has keep the easing pedal pushed and slashed interest rates. And the basis for the RBA's policy decision? Of course, still tepid data from China and an uptick in Australia's inflation, which together lowered the core inflation in the country to 2.27%. The continued rise in housing prices, especially in the Sydney area, was largely ignored and essentially shrugged off by an RBA undeterred from turning off its accommodative policy. Continue reading "Aussie Dollar: A Matter of Timing?"→