I want to start across the other pond, as written and predicted by PARITYFX on the 17th March, the RBA (Australia) has cut interest rates by 0.25% to 2.00%. After starting the easing cycle in February, the RBA jumped March and April and cut. The RBA members are waited because (1) benefit in allowing some time for the structure of interest rates and the economy to adjust to the February rate cut, (2) advantages in receiving more data to indicate whether the economy was on the previously forecast path, and (3) a greater degree of uncertainty about the behaviour of borrowers and savers in a world of very low interest rates. The AUDUSD is trading around 0.7870 having appreciated vs the USD on the news to 0.7909. The RBA “judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand,” citing “inflation is forecast to remain consistent with the target over the next 1-2 two years, even with a lower exchange rate”. The RBA did not specifically note their bias towards the AUD noting “further depreciation (in the AUD) seems both likely and necessary, particularly given the significant declines in key commodity prices”. As I mentioned back in March the RBA are now likely to exercise patience and see how the latest cut feeds into the economy. Further cuts will ONLY come if the RBA feel the economy is still struggling and needs another fresh rate cut. The latest cut will add to the already strong housing market and add to the wealth effect that one is witnessing in Sydney, Melbourne and Perth. Given the slowdown in China, the RBA has no choice but to throw everything they have at stimulating the economy irrespective of the consequences on the already overheated housing market.
Important day for Greece tomorrow as the IMF awaits confirmation on whether they will see their money (€1bn give or take). The FT reported over the weekend that the IMF has threatened to withhold further support to Greece unless Greece delivers adequate and trusting reforms (we saw this a few weeks ago when the IMF met in the USA). No doubt the ECB, IMF and Eurozone creditors are all watching tomorrows due date to see how far Greece has come to sorting out their financial woes. In my humble opinion, Greece is unlikely to have the funds to replay the IMF, which will have to allow Greece more time to repay the debt. Truth is until such time we see meaningful reforms instituted in Greece, Tsipras will simply try to “rob Peter to pay Paul”, and in other words any money they get will simply be diverted to pay off other creditors. Greece’s debt mountain will continue to climb until such time they realise the game is over and they have no other option other than to toe the line, reform and potentially DEFAULT. The run on the local banks will continue and if I had my money with a local bank I would be making darn sure I have my money as far away as possible to protect it.
“3 days of the Condor” or should I say 3 days to decide whether the country goes FORWARD on the current path (Conservatives) or BACK to 2008 financial chaos/bankruptcy/disaster (Labour /SNP). The 2 Ed’s vehemently denying that they will tie up with the SNP to form a coalition govt, is a flat out LIE. Any reasonable person should see through this and vote against the atom bomb. If the SNP get into power it will make Napoleon’s policies look like child’s play. The English, Welsh and N.Irish will suddenly find themselves at the mercy of Naploleon (Nicola) not to mention at the mercy of every and any nation or terrorist that is looking to harm our beautiful United Kingdom (no Trident). SME’s….all that hard work to get where you are today will be kissed goodbye. Start looking to lay off staff and get a job. Needless to say those with jobs will come into work and do as they are told because anything less will see them on the street looking for a job while competing with 100@s of other people in the same predicament. Yes the decision is really that easy, vote FORWARD or BACK.
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