RBA Concerned With Over-Inflated Australian Housing Market, AUD Drops
The Monetary Policy Meeting Minutes were released yesterday from the Reserve Bank of Australia. On the agenda was the discussion about the worrying 7.7% house price index figure. The RBA displayed a dovish tone about the Australian economy yesterday specifically in response to the increasing unemployment, high levels of housing debt and a potential housing bubble in many areas.
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An interest rate hike later in the year is now looking less likely and the market has reacted with a dip in the ‘Aussie’ against a basket of currencies. Falling almost a cent against the ‘Greenback’ overnight and more against the Pound.
A resurgence in Chinese steel production however provides some hope for the struggling AUD. This has caused certain key Australian commodity prices to swell, with iron ore prices doubling to almost USD92 per tonne. A stronger commodities sector again should help offset some of the fear around Australia’s housing market.
‘Hawkish’ UK Inflation Pushes Sterling to Near 1-Month Highs
Last year’s UK Consumer Price Index was at 1.8%; the Bank of England Governor Mark Carney previously targeted a 2% CPI figure for this period. Yesterday this figure came in much higher than expected at 2.3%, this reveals the strength that is still within the UK economy.
Without the looming political fear of a Brexit one could well expect a rate rise from BoE. Everything considered an interest rate hike is very unlikely but if the inflation trend continues throughout this year it will certainly put pressure on the BoE to discuss a potential cash rate increase later in the year.
The market reacted bullish with just under a 3 cent rise against the Australian dollar as well as an array of other currencies. Investors are now looking toward the triggering of Article 50 by British parliament and Prime Minister Theresa May on the 29th of this month.
The GBP is currently trading at 1.6267 against the AUD