Australia property is facing a perfect storm of an apartment glut, tight bank lending especially to buyers of apartments when they may be most needed and a close fought national election with property taxation a major policy battle-ground. It is no longer a matter of whether apartment prices will fall but what will be the fallout to financial stability and the rest of the economy. Add in a sudden reversal of fortune for commodity futures prices in China and intense scrutiny over financial stability and policy direction in China and the risks are all lining up for deeper rate cuts by the RBA and steeper fall in the already wounded AUD. The NZD looks more stable given rapid immigration underpinning its property market. But its central bank is preparing more macroprudential measures and a weaker AUD and lower RBA cash rates are likely to pressure the RBNZ towards more rapid action.
We are leaning towards some further modest rebound in the USD after its significant retreat this year. We suspect we may see this against both EUR and JPY as the market refocuses on the aggressive monetary policy easing stances of these two currencies’ central banks. We retain a fairly balanced view on the US economy, […]
Overall it appears that US economic activity has lost momentum over the last year and the strength in the labor market looks out of place. Weaker growth trends in the UK and Japan and doubts returning over growth momentum in China point to waning global growth momentum. After the significant fall in the USD this […]
Global equities look tired and are exhibiting investor fears over diminishing capacity for and returns from further global monetary policy easing. Policymakers are admitting problems and looking more impatiently to governments to step up efforts to stimulate growth with fiscal stimulus and structural reform. However, significant progress on this front almost seems hopeless and central […]
We think the case is clear for the RBA to cut rates tomorrow and are predicting this outcome. The much lower core inflation reading, evidence of tightening bank credit conditions, some softening recently in credit growth, cooler job vacancies, a stronger AUD, some renewed doubts on China and timing of the 2 July election suggest […]
The non-policy decision by the BoJ, creates considerably uncertainty over when the BoJ will consider easing policy further. Kuroda suggests he simply needs more time to assess the effects of NIRP, in the order of six months or more, which pushes action out until at least late-July. It seems he and other policymakers are willing […]
Elevated and rising risk factors for AUD The much lower than expected underlying inflation measures in Australia, evidence of an ebbing housing market and rapidly approaching national election on 2 July make the case for a rate cut by the RBA next week. This is likely to keep the AUD on a weak footing. The […]
The market appears prepared for the Fed to revert to a ‘nearly balanced’ risk assessment. We are not looking for a big reaction to this outcome. It might give the USD a modest boost by implying that a hike in the summer is being considered, but a hike by July (after the Brexit vote) is […]
The BoJ’s deep throat policy makes sense this time around after the shock tactics back-fired in January. The market is being massaged to expect comprehensive easing including a further rate cut aimed at a weaker JPY. This time around expect most of the action ahead of the BoJ meeting next week. JPY may weaken near […]
A sharp rebound in Chinese steel and iron ore prices, a sharp rebound in Chinese major cities property markets, improvement in recent activity indicators, easier monetary and fiscal policy, and calmer Chinese equites and currency in recent months have argued for a recovery in global risk appetite. However, just when confidence appears more stable is […]