The RBA minutes from the April board meeting reflected on the strength of the Australian Dollar and was partly attributed to increase in commodity prices specially oil and iron ore. However the minutes showed the Central Bank continuing its accommodative monetary policy in leaving the cash rate unchanged at 2%. The CPI number becomes the next focus as the numbers come out later this week for the first quarter of this year and we expect the numbers to be still in the lower end around 2% of the RBA target band. Since mid-January, brent crude prices went up by 55% and iron ore prices by 47%. The rebound in the iron ore prices will be a positive reflection in the budget to be handed down by the Treasurer on 3 May. The mid year economic forecasts used the iron ore price at USD 39 a ton whereas the current price is now above USD 55. The reluctance of the US Fed in lifting rates has also provided boost to the local dollar. The FOMC has clearly stated that despite strong labour market data and consumption data in the US, international economy is still weak and stimulus is still being provided by the ECB to help the EU and China is definitely slowing and pressures are still continuing in the emerging markets. We still believe that the strength in AUD is temporary and is likely to ease and settle around US 70 cents and we do not expect any change in rates in 2016.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) Iron Ore 60% MBIOI-IR index USD/t (*Wednesday update) | As at 22-Apr 2.00 2.27 2.63 1.89 0.7762 0.6871 85.64 5.0357 5236 2,091 18,003 2,959 45.11 1233 57.27* | As at 15-Apr 2.00 2.28 2.55 1.75 0.7711 0.6850 84.51 5.0004 5157 2080 17897 3078 43.1 1233 54.50* |
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