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Iranian Foreign Ministry Spokesperson: We do not support the proposals made by US officials and their media regarding the Iranian nuclear issue.Federal Reserve Governor Waller: I am not worried about the dollar losing its reserve currency status and it still enjoys the trust of all parties.On April 18, Bank of Canada Governor John Macklem stated that he expects inflation to accelerate in March, but likely remain below 3%. He also noted that officials will closely monitor medium- to long-term inflation expectations when deciding whether to raise interest rates. Macklem said, “The central bank doesn’t want to act too early, raise rates, and drag down growth, especially when growth is already weak. On the other hand, you don’t want to act too late and let inflation take hold and become entrenched.” Statistics Canada is scheduled to release March inflation data next Monday. A few hours later, the Bank of Canada will release its quarterly survey, measuring business and household sentiment, which will provide the first clue to inflation expectations. Macklem said he is not too worried about higher short-term inflation expectations, which will be sensitive to the sharp rise in energy prices stemming from the conflict with Iran. “That’s what would really worry us if businesses and households weren’t confident that inflation would return to 2% in the medium term,” Macklem said. Bank of Canada officials expect the energy price increases to not quickly transmit and push up the prices of other goods and services. Unlike the early part of this decade when inflation reached a 40-year high after the COVID-19 pandemic, overall inflation was below 2% before the Iran war. In addition, core price increases have slowed, and the countrys economy has spare capacity, which should limit price increases.Federal Reserve Governor Waller: Scenario analysis is crucial for central bank officials.April 18th - According to a source familiar with the matter, Cursor, a leading startup in the field of artificial intelligence programming, is in advanced talks with investors to raise approximately $2 billion in a new funding round, which would value the company at over $50 billion (excluding this round of investments). The source stated that existing investor Andreessen Horowitz will co-lead this round. Two other sources indicated that Nvidia also plans to participate in the funding round. One source stated that Thrive Capital is also in talks to participate.

The Australian Dollar's Future Could Be Revived by the RBA. Is it Better to Hike or Not to Hike?

Drake Hampton

Apr 02, 2022 09:48

Tips

  • On the back of robust commodities, the Australian dollar is testing previous highs.

  • The RBA may be on track for a May rate hike if CPI surprises to the upside.

  • Central banks intervene when transient inflation becomes entrenched.

 

The Australian Dollar has been bumping up against resistance levels, despite the fact that the Australian economy's basic fundamentals remain robust.

 

The currency is supported by a backdrop of rising commodity prices and a relatively solid national balance sheet.

 

By historical measures, the Australian dollar has depreciated since the float in 1983, while the terms of trade have remained multigenerational highs. This has a beneficial effect on the home economy.

 

Australia has enjoyed extraordinary prosperity since the RBA was authorized with an inflation targeting framework in 1993. While political parties of all stripes would like to claim credit for the positive outcome, the reality is that the central bank's prudent management has been critical in preserving the nation's riches and economic health.

 

The RBA is expected to encounter a hurdle at its May 3rd monetary policy meeting, but it is one they have faced previously. Australian CPI data will be released on April 27th, and all indicators are that it will likely shoot the lights out. Prior to May 21st, a federal election will be place.

 

The market is pricing in a slim possibility of a May hike but a significant probability of the first rate hike in June. The RBA said following its February meeting that it will wait until the first-quarter CPI statistic is released before making a rate decision.

 

The market appears to believe the RBA will postpone its decision until after the election. They increased rates right before an election in 2007. If the CPI rises above a certain level, history shows they will act.

 

Complicating matters is the US Federal Reserve's egregious policy blunder. The argument that inflation caused by 'cost push' is 'transitory' has been disproved.

 

The RBA has the track record and playbook to contain inflation before it reaches 'eye watering' levels. May's meeting could very well be 'live' for a CPI-dependent rate hike.

 

With a more hawkish RBA, the Australian dollar might trade above long-term norms.

 

Since The 1983 Float, The AUD/USD Has Regressed.

 

AUD/USD Regression Since The Float In 1983

 

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