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Australian dollar may reverse trend
Published on 04.07.2017 15:26

The Australian dollar has taken a tumble in today’s trading session after a less than enthusiastic speech from the RBA had investors predicting that an interest rate hike was now off the table.

The currency dived around 1 percent after comments from Reserve Bank of Australia governor Philip Lowe on the state of the Australian economy and the central banks outlook.

They noted that the Australian economy is expected to strengthen gradually over time, but inflation remains weak on the back of slow wage growth and an ever-growing number in household debt.

"I think those people in the market who are hoping or looking for the Reserve Bank to be a little more hawkish will probably be disappointed, and that's why we've seen the Aussie dollar come off," noted Gareth Aird, senior economist at Commonwealth Bank of Australia

"The central banks that have gone to a slightly more hawkish stance more recently, they're all at a different place than what the Reserve Bank is," he added.

After last week’s bullish speeches from Bank of England Mark Carney and ECB President Mario Draghi the market was expecting the same from the RBA on the back of improving employment figures and overall business confidence.

This may be now the start of a reversal in trend for the Australian dollar as some had been expecting a rate hike in the not too different future, but with the RBA still concerned about inflation this option might be off the table for the time being.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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