Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.
RBNZ Rate Cut:
The RBNZ was widely tipped to cut their benchmark rate 25 basis points yesterday but instead the Reserve Bank of New Zealand cut by 50 basis points signalling not all is well at home and sending equity markets, commodities and the AUD into a bit of a tailspin. In fact AUD/USD fell below 0.6700 in the moments after the RBNZ meeting to hit a fresh 10 year low of around 6675. Commodity prices and equities also got sold off in a knee jerk reaction to the cut, which typically of that magnitude (50 basis points) only occurs during or near to a recession. Thankfully the AUD has recovered right across the board and is at the same level against the majors as this time yesterday morning.
While equities in the U.S and Europe had a mostly positive night, Gold has continued to soar as investors and governments continue piling into the yellow metal. China and Russia have been some of the biggest buyers over the past few years, while investors more recently have jumped on board as the potential risks of a recession become elevated. The Gold price in AUD terms is up nearly 30% since the start of the year from just under A$1,700 to A$2,221 this morning.
Where to from here?
No economic data is due out today and markets seem somewhat calm this morning. The AUD is at or near 10 year lows right across the board, with potentially more pain to come. Where the floor in AUD/USD is, is a question for people smarter than me, but I think it’s a distinct possibility we test the low 0.60’s before seeing any meaningful recovery. During the GFC we hit a low just under 0.6000 vs the Greenback, if we see that again then that may signal a reversal in fortunes is close. I continue to recommend caution and Forward Hedging for importers.
AUD EXCHANGE RATES:
AUD/USD – 0.6729
AUD/GBP – 0.5534
AUD/EUR – 0.6003
AUD/NZD – 1.0454
AUD/JPY – 71.504
All Ords (XAO) – 6,588
Gold – A$2,221/oz
Silver – A$25.31/oz
WTI – US$52.24/barrel
DATA RELEASES TODAY:
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