Australia’s Central Bank Sees No Need for More Stimulus

(eToro Blog) Australia’s economy continues to outshine that of nearly every other developed nation, and in spite of a darkening global outlook there is no cause for alarm according to the Reserve Bank of Australia. The RBA released the minutes of its July meeting earlier today and said that there was “no need” for an interest rate cut and that the stimulative actions previous taken were appropriate, with new evidence showing that earlier accommodation had provided the Australian economy with more momentum than originally foreseen.

The RBA aid that its 3.5% cash rate had sufficiently encouraged borrowing among Australian industry, and a noticeable increase in applications for business credit had been seen over the past several months, following a long drought. The central bank did note that the too strong Australian dollar was continuing to pressure certain sectors, but that the all important mining sector had seen unexpected improvement.

Of note, the RBA said that inflation pressures were well contained, and attributed to the strong currency and a decline in oil price. The RBA members expect that second quarter GDP could ease back slightly, after a surprising strong showing of 1.3% in the first. The outlook for China is still is a question mark for the RBA, and the RBA notes significant risks in the Eurozone with concerns of a possible spillover should the conditions deteriorate further.

That uncertainty is the reason the markets are still pricing in more RBA rate cuts in the future, with one analysis forecasting a 1% drop over the course of the next year though a larger majority believe that the cash rate could bottom out after another 25 or 50 basis points. Nonetheless, in the short term the news helped to buoy the Aussie Dollar which rose to its highest price against the greenback in almost two weeks; the AUD/USD is currently trading at 1.0293 slipping back from the day’s high of 1.0308.

Sentiment on OpenBook is bearish as of this writing, with 78% of AUD/USD traders selling against 22% buying. OpenBook guru mfmfuzz from Sri Lanka has closed out a number of long positions in the pair, before and after the minutes release, with gains which ranged from 3% to 16%. The trader’s allocation in the AUD/USD pair has been nearly 100% over the past three months, with the small 0.4% allocation in gold eliminated over the past month and the now 100% allocation returning a profit of 5.1%. The guru’s profit for the month was 59.8% and improves to 300% for the quarter. As of this writing, the guru has 384 followers and 104 copiers.

OpenBook guru nunocarapuca from Portugal has a small 4.6% allocation in the AUD/USD pair, but that allocation has provided the highest gain in his portfolio, at 117.3% over the past month. The trader opened a short position in the pair earlier which is currently showing a small gain. Meanwhile, a long position that was opened in late May now is showing a 230.40% gain; that position has a TP of 1.0609.

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