RBA to move rates higher?

Source: Dukascopy Bank SA
"The market is becoming more and more convinced that the RBA easing cycle has ended with the rate curve no longer pricing in any further cuts"
- Boris Schlossberg, BK Asset Management managing director

The Australian Dollar is moving back into "uncomfortable" level against the U.S. Dollar, with the pair climbing to 0.91. The Aussie is strengthening helped by some certainty over the local interest rate outlook and overall economic forecast. Australian policymakers left the key refinancing rate unchanged at 2.5%, pledging a period of stable interest rate. Minutes also showed that record-low interest rate are boosting growth. The central bank now believes that stable interest rates will bring the Aussie lower, providing additional boost to the economy. The easing cycle is over, the RBA made it clear. But perhaps, will they follow RBNZ's example soon?

This week RBA governor's and his deputy's comments can provide additional boost to the Aussie, as they can shed some light on future plans. At the same time, Westpac Banking Corporation chief economist Bill Evans, who correctly called the timing of the RBA's first rate cut in 2011, warned that the next move will be a rate hike, not another reduction of the benchmark interest rate. By the end of 2015 the key refinancing rate is likely to stand at 3%, Evans told last week. He warned consumer spending will lose some ground, as well as non-mining sectors will provide additional boost to the resource-rich economy. In contrast, construction sector will become one of the biggest nation's drivers.
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