Australian central bank keeps interest rate on hold

<p>The Reserve Bank of Australian (RBA) maintained interest rates on hold, as expected by market consensus. However, there was a change in tone. Previously, the […]</p>

The Reserve Bank of Australian (RBA) maintained interest rates on hold, as expected by market consensus. However, there was a change in tone. Previously, the policy adopted by the RBA was one of luxury – a wait and see approach.

Seeing recent economic data would suggest that if inflation comes in below trend rate of 2-3%, then there will be a high likelihood of rates being cut by around 25 basis points in May. The RBA also said the terms of trade have probably peaked but remain high. Commodity prices are also off their peaks but stable at very healthy levels for the economy.

On China, the RBA said growth was likely to remain at more “measured and sustainable” levels in the future. We interpret that as being sub 10%, which is in line with market expectations anyways.

The overall tone of acknowledging growth below expectations, despite not cutting, sent the Australian dollar lower. It last traded at 1.0395 against the US dollar after trading above 1.04 for most of the trading day.

The Euro remained unchanged at 1.3335 against the US dollar while the Japanese Yen staged a late rally, with the US dollar last buying 81.95.

In commodities, gold gained slightly, as did copper which now looks to settle above US$3.91/lb – a very healthy level.

We spoke with Discovery Metals CEO Brad Sampson this afternoon to ask about the copper and silver miner’s prospects and project ramp up in Africa. Sampson said he remains quite comfortable with the current copper price and sees continuing strong demand for Chinese buyers.

He notes ongoing supply challenges in larger mines and diminishing grades. Discovery has around 40% of its initial production ramp up hedged at around US$4.01/lb – mainly for project financing requirements – but hopes to maintain as much leverage to copper price movements as possible.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.