23 July, AtoZForex.com, Lagos – Yesterday, Australia’s CPI q/q was released, coming very close to forecast at 0.7%. This is seen to create room for the central bank to lower interest rates further if necessary, haven already been cut twice this year to a record-low 2 percent. The authorities are trying to boost the domestic industries to spur hiring as they seek to extend 24 years of growth and are likely to look through inflation driven higher by a weaker currency and higher oil price.
Reserve bank of Australia governor Glenn Stevens commented that: “A period of somewhat disappointing, even if hardly disastrous, economic growth outcomes, and inflation that has been well contained, has seen interest rates decline to very low levels,’’ ‘‘The question of whether they might be reduced further remains, as I have said before, on the table.’’ The central bank continues to focus on trying to rebalance the economy away from mining in the north and west as investment wanes, to inspire manufacturing, residential construction and consumption in the nation’s south and east. Also, Australia’s jobless rate came at 6 percent last month as employers edged up on hiring, spurring optimism the RBA’s effort to shore up the economy could be starting to pay off.
Impending UK Rate Hikes
The UK MPC Official Bank Rate Votes and MPC Asset Purchase Facility Votes remained at 0-0-9 as expected. Information from the Bank of England minutes hints on the fact that some of the central bank’s rate-setters are waking up to the idea of voting for the first increase in borrowing costs in over eight years. According to the minutes of the meeting, all nine members of the BoE’s monetary policy committee voted to leave rates at a record low of 0.5 percent. But developments hint on a possible split in coming meetings. As the risk of Greece significantly diminishes, the policy makers will now pay more attention to local conditions to drive their decision.
“Absent that uncertainty, the decision between holding Bank rate at its current level versus a small increase was becoming more finely balanced,” the minutes said.
Economists have also forecast the possibility that three of the MPC’s nine members may vote for a rate hike in August, the first step to a majority vote to come latter in the year of early 2016. BoE Governor Mark Carney has also been vocal about the likelihood of a hike, which may come around the end of the year. The GBP had been in a consolidation against the USD for some days. A catalyst is needed for a breakout. Maybe a good retail sales reading today can ensure a bullish breakout.
RBNZ Cuts Rate, Again!
Interestingly, the Reserve Bank of New Zealand cut rates again, making it two consecutive months of cut. The rate was dropped from 3.25% to 3.00%. The Statement by Reserve Bank Governor Graeme Wheeler showed that the ailing economy has been a major concern, prompting further cuts: New Zealand’s economy is currently growing at an annual rate of around 2.5 percent, supported by low interest rates, construction activity, and high net immigration. However, the growth outlook is now softer than at the time of the June Statement. Rebuild activity in Canterbury appears to have peaked, and the world price for New Zealand’s dairy exports has fallen sharply. The NZD spiked up about 80 pips against the USD after the release.
Greek Parliament Votes “Yes”
Early today, the Greek parliament again passed the bill for the second package of prerequisites for further financial assistance presented by Prime minister Alexis Tsipras. The country has now made a decision to remain in the Euro, as a vote against this policies would have resulted in a Grexit as warned by the European creditors. This is expected to further strain the relationship within the Syriza party as some hardliners insist on no to further austerity measures.
Calendar for the Day
- 8:30 A.M GMT- UK Retail Sales m/m
- 12:30 P.M GMT- Canada Core Retail Sales m/m and Retail Sales m/m
- 12:30 P.M GMT-US unemployment claims
- 10:45 P.M GMT- New Zealand Trade Balance