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11 Mar 2014
Flash: China risk for AUD - RBS
FXStreet (Guatemala) - Strategists at RBS explained that while financial market conditions in China point to a weaker outlook and should dampen commodity currencies, global markets are exhibiting an at least stable if not more confident outlook for growth.
Key Quotes:
"This implies some confidence in the recovery in major economies and some other emerging markets, such as India. This is helping prevent a bigger fall in the AUD".
"Furthermore, the Australian economy has responded to lower rates and the associated strong rise in its property/housing market".
"The mining sector has already responded to a weaker outlook for iron ore prices by reducing its investment intentions, and thus there is unlikely to be further significant retrenchment in activity in this sector".
"The potential impact of weaker iron ore prices therefore needs to come through a weaker earnings outlook affecting wealth and lower expected tax revenue. The RBA will not be lurching to cut rates in response to the lower iron ore price. But at the margin it does lower the medium outlook for rates".
Key Quotes:
"This implies some confidence in the recovery in major economies and some other emerging markets, such as India. This is helping prevent a bigger fall in the AUD".
"Furthermore, the Australian economy has responded to lower rates and the associated strong rise in its property/housing market".
"The mining sector has already responded to a weaker outlook for iron ore prices by reducing its investment intentions, and thus there is unlikely to be further significant retrenchment in activity in this sector".
"The potential impact of weaker iron ore prices therefore needs to come through a weaker earnings outlook affecting wealth and lower expected tax revenue. The RBA will not be lurching to cut rates in response to the lower iron ore price. But at the margin it does lower the medium outlook for rates".