The Australian dollar had another stellar performance overnight as bullish traders supported it above .79 cents.
“The Aussie, along with its commodity bloc cousins (the Canadian and Kiwi dollars) were among the best performers of the forex majors,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“Looks like the bulls remain unprepared to give ground regardless of what the Reserve Bank of Australia (RBA) might say,” he added.
Traders ignore central bankers’ jawboning
McKenna pointed out that traders haven’t really listened to European Central Bank (ECB) President Mario Draghi when he’s tried to be dovish recently.
The Reserve Bank of New Zealand (RBNZ) governor also suffered the same fate when he was talking the Kiwi dollar down recently.
“So why should Aussie dollar bulls suddenly be worried about what the RBA says about rates when the RBA itself is probably the most bullish forecaster on Australian growth in the market,” McKenna said.
McKenna said that while the RBA has expressed concerns about consumer debt and employment, the reality is all these factors mean that the Australian economy will be growing at its potential.
“If the RBA is right on the outlook for the economy, then it is inevitable that rates will rise in Australia regardless of the entreaties of deputy governor Debelle last Friday or likely entreaties from RBA governor Lowe in his speech tomorrow,” McKenna said.
In the meantime, McKenna said in the short-term, the .80 cents level for the Aussie dollar may be unrealistic.
“I see that in the short-term 80 cents might be a bridge too far given the likely CPI result tomorrow, speech from Governor Lowe and the potential reinforcement of a positive US dollar outlook from the US Fed in this week’s meeting,” McKenna said.
McKenna maintains his view that if the RBA is right on growth then Australia is going to experience the rates of growth President Trump promised for the US.
“But it increasingly seems that the US, Europe, Japan, and the UK will all be languishing way behind in the growth stakes over the next year or two,” he said.
“If that’s the case and if the RBA is right on growth, then rates will rise in Australia, growth will be strong and the Aussie dollar will have an upward bias,” McKenna explained.
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