-Credit Agricole
The Australian Dollar was the best-performing currency among other nine major currencies last week, with AUD index rising more than 1%. The main reason for such a performance were some bright spots in capital expenditure, with promising indicator of investment in equipment. Moreover, the U.S. Treasury 10-year yields sank to an 11-month low, on the back of disappointing Q1 GDP figures.
Prospects for the Oz economy, however, are getting more gloomy, as panic in the public service was very noticeable following Federal Treasurer Joe Hockey's budget. The central bank is unlikely to act on Tuesday, and will stick to its pledge to keep monetary policy unchanged for some time, however, long-term perspectives are suggesting the easing cycle may be revived.
Another worrying sign is weak external interest for the housing market. The central bank was hoping the property market will be able to offset a decline in the mining sector. Nevertheless, the share of foreign investors of the market has remained almost unchanged over the last two decades. While Joe "Slasher" Hockey urged the committee to examine the current rules, which limit the inflow of investment, any increase in foreign housing demand will spill over into higher dwelling prices. The RBA is facing a dilemma now how to boost growth and assure a long-term prosperity without breaking its own promise.
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