I think the AUD is range bound around 8030 to 8300 range for now. So a mid-point seems about fair value for now in my opinion, its had a bit of haircut so to speak from last year without any rate movement.
Bond markets have priced a 0.5% cut, but AUD/USD has probably priced some of that cut already.
In my opinion, the RBA is aware of the low risk fee rate and doesn't want to fuel a bubble in real estate, so even if they do cut rates, it will be 0.25% with a sit and wait for a while. Bank economists over here are spruiking a rate cut more so now, but I often think they have an incentive to do that as rate cuts stimulate banking activity.
Despite lower commodities prices, we are exporting a lot more commodities than before, and that will create an underlying demand for the AUD, so I don't see it hitting the rock bottom (5000 range) of the early 2000 era (as I don't see the Fed raising rates too high either).
My worst case downside for 2015 is to 7500 with RBA 0.5% rate cuts and the US fed raise to 0.4%. It will take 6 months for this rate differential to occur at the earliest, so I expect sentiment to move up and down until they play out.
I study the Copper market daily, and this is a commodity that is a barometer of economic activity. They expect it to be in a small surplus this year, its used for construction and electronics of all sort, if this starts to drop rapidly in price then I'll really start to get worried, but its pretty firm around USD2.5/lb where miners can make a good margin. Copper is not a major export of Aust, but its a bit like Oil as a barometer of economic activity, it just hasn't got the oversupply of Oil. Oil is in demand, its just that the price and overall economic activity has been clouded by supply led technology I that commodity.
I think the RBA will wait and watch to see what happens in Canada. I may be wrong, but this is my best guess for now.
Bond markets have priced a 0.5% cut, but AUD/USD has probably priced some of that cut already.
In my opinion, the RBA is aware of the low risk fee rate and doesn't want to fuel a bubble in real estate, so even if they do cut rates, it will be 0.25% with a sit and wait for a while. Bank economists over here are spruiking a rate cut more so now, but I often think they have an incentive to do that as rate cuts stimulate banking activity.
Despite lower commodities prices, we are exporting a lot more commodities than before, and that will create an underlying demand for the AUD, so I don't see it hitting the rock bottom (5000 range) of the early 2000 era (as I don't see the Fed raising rates too high either).
My worst case downside for 2015 is to 7500 with RBA 0.5% rate cuts and the US fed raise to 0.4%. It will take 6 months for this rate differential to occur at the earliest, so I expect sentiment to move up and down until they play out.
I study the Copper market daily, and this is a commodity that is a barometer of economic activity. They expect it to be in a small surplus this year, its used for construction and electronics of all sort, if this starts to drop rapidly in price then I'll really start to get worried, but its pretty firm around USD2.5/lb where miners can make a good margin. Copper is not a major export of Aust, but its a bit like Oil as a barometer of economic activity, it just hasn't got the oversupply of Oil. Oil is in demand, its just that the price and overall economic activity has been clouded by supply led technology I that commodity.
I think the RBA will wait and watch to see what happens in Canada. I may be wrong, but this is my best guess for now.