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#1 2016-03-07 23:28:24

JulieW
Silver Stacker
From: Australia
Registered: 2010-10-14
Posts: 10,898

AUD and GDP

If this continues for a month it seems we'll see the RBA cut.

Is that a zero I see on the horizon?

The Australian dollar's current strength could shave about one percentage point off growth, according to Capital Economics, as non-resources exports lose their competitive edge.

Chief economist for Australia Paul Dales says that even the Aussie's current level "poses a serious threat to the economic outlook".

The local unit jumped about 1 per cent overnight, to US74.85¢, after the price of iron ore leapt a record 18.6 per cent to $US63.74 a metric tonne.

The surge, on speculation about Chinese steel production, wrong-footed a range of analysts, who said the metal's recent rally would soon run out of steam.

The Aussie dollar, too, was expected to ease once iron ore turned down.

However, the commodity's continued recovery, along with surprisingly strong growth in fourth-quarter gross domestic product last year, low global interest rates and doubts about the pace of the US Federal Reserve's nascent monetary tightening have converged to push the Aussie to eight-month highs.

A gathering chorus of economists say the Reserve Bank of Australia could soon resume talking the currency down, or even consider its first cut in the cash rate since May last year.

However, current market pricing has pushed back bets on such a reduction to next February.

"The level of the currency is a big deal for an open economy like Australia and is especially important at the moment for two reasons," says Dales.

"First, with interest rates at a record low, a weaker exchange rate is arguably a more effective way to boost economic growth and inflation than further interest rate cuts."

"Second, the 25 per cent weakening in the dollar on a trade-weighted basis since 2013 has played a large role in supporting GDP growth."

He calculates that the Aussie's decline, in line with commodity price falls, since 2013 has added an average 0.7 percentage points to annual growth in GDP. 

Non-resource net exports - after subtracting imports - accounted for 0.9 percentage points of Australia's surprise fourth-quarter surge in GDP, to 3 per cent year-on-year.

All this could be undone, however, if the Aussie continued to firm, although the improvement in national income from the higher iron ore price would help offset the hit to non-resource exports.

"If other things remained the same, the annual rate of GDP growth would fall from 3 per cent at the end of last year to just 1 per cent by the end of this year," said Dales.

http://www.theage.com.au/business/marke … nd1su.html

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#2 2016-03-07 23:36:11

sammysilver
Silver Stacker
From: Sydney
Registered: 2011-04-07
Posts: 5,408
Trades :   188 
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Re: AUD and GDP

If the RBA cut the rate by 0.25 percent to 1.75 percent, that might translate as a 12.5% drop in the Aussie to about 66 US cents. If silver spot stayed the same, the AUD spot would be about $24. On top of this,we do have a slowly increasing spot rate.


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#3 2016-03-08 01:17:17

Silverthorn
Member
Registered: 2010-04-29
Posts: 2,533
Trades :   

Re: AUD and GDP

Saxo bank economist tipping parity again with the US dollar. big call.

An Australian dollar at parity with the greenback again? It's a possibility, and Saxo Bank's chief economist Steen Jakobsen is betting on it.

The colourful economist for the Danish investment bank, famous for his annual "outrageous predictions", said the shrinking global liquidity following interest rate rises in the United States and negative interest rates in Japan and Europe is driving volatility in capital markets, but it's boom time for the local currency.

Read more: http://www.smh.com.au/business/markets/ … z42Hlrgl4Y
Follow us: @smh on Twitter | sydneymorningherald on Facebook

http://www.smh.com.au/business/markets/ … nd8bw.html

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#4 2016-03-08 01:26:57

Caput Lupinum
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From: Silver Stackers forum
Registered: 2012-06-17
Posts: 4,961
Trades :   11 

Re: AUD and GDP

sammysilver wrote:

If the RBA cut the rate by 0.25 percent to 1.75 percent, that might translate as a 12.5% drop in the Aussie to about 66 US cents. If silver spot stayed the same, the AUD spot would be about $24. On top of this,we do have a slowly increasing spot rate.

Depends what the US economy and the Fed are doing. If the US economy is indeed weakening, the US economy dwarfs the Australian economy. Any further hint from the markets that the Fed will not tightening policy further will still place upward pressure on the AUD as the USD weakens even if the RBA do cut.

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#5 2016-03-08 01:49:55

SilverDJ
Member
From: Australia
Registered: 2014-11-01
Posts: 2,486

Re: AUD and GDP

Silverthorn wrote:

Saxo bank economist tipping parity again with the US dollar. big call.

Wow, huge call.
I'm happy with +/-10%, that's the "meh" range where as a business you don't really have to worry about it.

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#6 2016-03-08 01:51:04

JulieW
Silver Stacker
From: Australia
Registered: 2010-10-14
Posts: 10,898

Re: AUD and GDP

Silverthorn wrote:

Saxo bank economist tipping parity again with the US dollar. big call.

An Australian dollar at parity with the greenback again? It's a possibility, and Saxo Bank's chief economist Steen Jakobsen is betting on it.

The colourful economist for the Danish investment bank, famous for his annual "outrageous predictions", said the shrinking global liquidity following interest rate rises in the United States and negative interest rates in Japan and Europe is driving volatility in capital markets, but it's boom time for the local currency.

Read more: http://www.smh.com.au/business/markets/ … z42Hlrgl4Y
Follow us: @smh on Twitter | sydneymorningherald on Facebook

http://www.smh.com.au/business/markets/ … nd8bw.html

At parity who would be brave enough to buy USD in expectation of a crash in the AUD again?

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#7 2016-03-08 01:52:54

Caput Lupinum
Silver Stacker
From: Silver Stackers forum
Registered: 2012-06-17
Posts: 4,961
Trades :   11 

Re: AUD and GDP

I would cool

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#8 2016-03-09 06:20:16

petey
Silver Stacker
Registered: 2010-05-18
Posts: 1,149

Re: AUD and GDP

Just bought me some USD. Expecting AUD to skyrocket tomorrow.

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#9 2016-03-09 06:27:46

Caput Lupinum
Silver Stacker
From: Silver Stackers forum
Registered: 2012-06-17
Posts: 4,961
Trades :   11 

Re: AUD and GDP

What are you expecting to happen tomorrow? Chinese inflation, Aussie consumer inflation, US Jolts, ECB meeting or just a general break though of the 75 cents resistance level?

Last edited by Caput Lupinum (2016-03-09 06:38:53)

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#10 2016-03-09 06:43:16

petey
Silver Stacker
Registered: 2010-05-18
Posts: 1,149

Re: AUD and GDP

Caput Lupinum wrote:

What are you expecting to happen tomorrow? Chinese inflation, Aussie consumer inflation, US Jolts, ECB meeting or just a general break though of the 75 cents resistance level?

Murphy's Law.

I don't understand forex. Wish I did. Have any good resources CL?

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#11 2016-03-09 06:46:31

long88
Member
From: Melbourne
Registered: 2012-06-19
Posts: 754
Trades :   13 

Re: AUD and GDP

i would empty all of my equity to transfer all of my money to usd, and park it at real estate over there.

i just did it on the last parity.

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#12 2016-03-09 06:55:21

Caput Lupinum
Silver Stacker
From: Silver Stackers forum
Registered: 2012-06-17
Posts: 4,961
Trades :   11 

Re: AUD and GDP

petey wrote:
Caput Lupinum wrote:

What are you expecting to happen tomorrow? Chinese inflation, Aussie consumer inflation, US Jolts, ECB meeting or just a general break though of the 75 cents resistance level?

Murphy's Law.

I don't understand forex. Wish I did. Have any good resources CL?

I'll trade the AUD/USD on the Chinese inflation figures tomorrow. That'll be it apart from the EUR/USD on the ECB meeting tomorrow night

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#13 2016-03-09 19:33:22

sammysilver
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From: Sydney
Registered: 2011-04-07
Posts: 5,408
Trades :   188 
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Re: AUD and GDP

NZ dropped its interest rate by .25% this morning. The Aussie is sure to follow, especially as the AUD is hitting 75 cents. Maybe a .5% drop?


The price we pay for the good life is public servitude.

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#14 2016-03-09 19:38:27

SpacePete
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Registered: 2014-03-01
Posts: 13,039
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Re: AUD and GDP

sammysilver wrote:

NZ dropped its interest rate by .25% this morning. The Aussie is sure to follow, especially as the AUD is hitting 75 cents. Maybe a .5% drop?

Maybe too drastic? But desperate times call for desperate measures.

Normally we'd have two drops of .25 each, but if if the AUD rises too far above the RBA's target then they could try some shock and awe.


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#15 2016-03-09 20:01:19

sammysilver
Silver Stacker
From: Sydney
Registered: 2011-04-07
Posts: 5,408
Trades :   188 
Website

Re: AUD and GDP

SilverPete wrote:
sammysilver wrote:

NZ dropped its interest rate by .25% this morning. The Aussie is sure to follow, especially as the AUD is hitting 75 cents. Maybe a .5% drop?

Maybe too drastic? But desperate times call for desperate measures.

Normally we'd have two drops of .25 each, but if if the AUD rises too far above the RBA's target then they could try some shock and awe.

A steep drop in the Aussie could lock in the next four weeks as the last opportunity to buy at sub $21! No more talk then of any future bottom.


The price we pay for the good life is public servitude.

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#16 2016-03-09 20:19:42

Silverthorn
Member
Registered: 2010-04-29
Posts: 2,533
Trades :   

Re: AUD and GDP

given recent stats, any move by the RBA to drop rates would be seen as purely currency manipulation.

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#17 2016-03-09 20:48:06

Caput Lupinum
Silver Stacker
From: Silver Stackers forum
Registered: 2012-06-17
Posts: 4,961
Trades :   11 

Re: AUD and GDP

You can forget about any of the big four passing on some or all of the cut to keep the real estate bubble propped up. Increasing bank funding costs have the banks weighing up the option of increasing their rates, not cutting them. The RBA cutting rates now would simply be in an effort to weaken the AUD to increase trade. Of course Shorten and Turnbull will stand up in front of the media and slam the banks for not passing on the cut for show, but they very well know that the banks won't pass on the cut.

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#18 2016-03-09 20:56:02

mmm....shiney!
Silver Stacker
From: 昆士蘭
Registered: 2010-11-15
Posts: 15,541
Trades :   101 
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Re: AUD and GDP

^ We locked in our mortgage at a fixed rate some months ago for this very reason. Crazily, the fixed rate was lower than the variable at the time. yikes


3<

"Every day is ordinary, until it isn't."

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#19 2016-03-16 18:57:55

sammysilver
Silver Stacker
From: Sydney
Registered: 2011-04-07
Posts: 5,408
Trades :   188 
Website

Re: AUD and GDP

The Fed has weakened its forecast on increasing rates. USD down, AUD, Ag & Au up.

I'm predicting the RBA will drop interest rates by 0.5%, .25% for the banks and .25% for the people. The AUD should drop to under 70c and Ag will hit at least AUD24.


The price we pay for the good life is public servitude.

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