RICARDO’S BUSINESS || A$ back above parity for how long?

After slumping around US10c in the space of a month, it just goes to show how sentiment driven our markets really are at the moment.


The surge overnight comes on renewed hope that a solution to the European debt crisis will be found.

The leaders of France and Germany are expected to reveal details of that plan sometime next month.

But it’s interesting to see, that the Australian dollar’s relative weakness in recent weeks have actually benefited retailers.

NAB’s Business Survey released today showed a rebound in business sentiment, back into positive territory.

There’s two main reasons for this; firstly the fall in the Australian dollar over the month. But some experts say, given the rebound in our currency, it makes this survey obsolete. Furthermore, ANZ is forecasting the Australian dollar will average US$1.10 over the last six months of next year.

The second player in business confidence is fresh speculation of an interest rate cut. Last week, the Reserve Bank revealed that it may cut the official cash rate if it needed to stimulate the economy. The market has clearly taken that to mean interest rates will come down soon.

CommSec today noted that a rate cut on Melbourne Cup day may be on the table, if inflation numbers released on October 26th shows that consumer prices are moderating.

ANZ meanwhile, has two interest rate cuts priced in over the next six months.

But let’s not forget the man who went out on a limb when most other commentators and economists were not even considering the possibility of loosening monetary policy.

Bill Evans from Westpac predicted back on July 15, following Westpac’s Consumer Sentiment Survey that there’d be 100bps worth of cuts coming our way, starting with the first in December.

Times have changed.