(This is an excerpt from an article I originally published on Seeking Alpha on August 7, 2012. Click here to read the entire piece.)
The immediate response to the Reserve Bank of Australia’s latest monetary policy decision was muted, but I think the statement spoke volumes.
The RBA essentially declared a soft economic landing in China:
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Once again, the RBA also seems little worried about the health of the domestic economy:
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Moreover, inflation should remain close to target in the near-term.
Finally, the RBA did not issue any stronger statements than usual about the strong Australian dollar (FXA). The observation that “the exchange rate…has remained high, despite the observed decline in the terms of trade and the weaker global outlook” has become boilerplate. It is certainly not enough to knock the Australian dollar off its currently bullish trajectory.
Overall, given the RBA’s positioning in this statement, I believe the outlook for the Australian dollar continues to improve from here, even if marginally. At a minimum, there is no strong case for a sustained bearish position against the currency until a new catalyst arrives to disturb the current momentum.
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on August 7, 2012. Click here to read the entire piece.)
Full disclosure: short EUR/AUD, GBP/AUD, AUD/JPY, and AUD/USD