Key highlights of the week ended July 24

Note: This section contains information in English only.
Source: Dukascopy Bank SA
Australia
RBA Governor Glenn Stevens said an interest-rate cut remains "on the table," while adding that the depreciation of the Aussie Dollar is having an expansionary effect on the nation's economy. The Australian Dollar has declined from above parity with the US counterpart in 2013 to around $0.75 recently, but has fallen less on a trade-weighted basis. The RBA lowered borrowing costs twice this year to a historic-low 2% as it aimed to accelerate a transition toward service industries and manufacturing as a decade-long mining boom fades. However, the easy policy is fuelling a housing bubble in Sydney and Melbourne. Hence, the central bank would prefer a weaker currency to boost the competitiveness of local industries.

Euro Zone
Athens took another crucial step towards a bailout after parliament approved a second set of reforms that was demanded by Greece's creditors. The passage of the measures means that talks on an 86 billion euros bailout can begin. The reforms include changes to Greek banking system and an overhaul of the judiciary system. Earlier on Wednesday, the European Central Bank approved another 900 million euro in ELA for Greek banks. Yet, lenders are still subject to strict capital controls.
Meanwhile, S&P's upgraded Greece's sovereign credit rating to CCC+ from CCC– and revised the country's outlook from negative to stable. S&P said it believes the possibility of Greece exiting the Euro zone by 2018 has declined to less than 50%, but the risk "is still high", particularly if Athens does not successfully implement the rescue programme.

New Zealand
The RBNZ cut interest rates for the second time in six weeks and hinted further easing will likely be needed to underpin inflation as growth slows. Central bank Governor Graeme Wheeler is trying to stoke inflation from near zero to 2% goal as plunging dairy prices curtail export returns and farmer spending. Thus, economists now expect the RBNZ to proceed with cutting the official cash rate in the near term to help jumpstart consumer inflation while cushioning the nation's economy from a precipitous decline in dairy prices, New Zealand's main export.

UK
BoE policy makers voted unanimously in July to hold the central bank's key interest rate unchanged. Yet, their unanimity masks increasingly lively discussions over the timing of interest rate hike. Minutes of the MPC's July policy meeting showed all nine members of rate-setting board voted to keep the benchmark interest rate at a record low of 0.5% and leave the central bank's bond portfolio at 375 billion pounds. The time for an interest rate hike is approaching and it is "highly likely" that rates will continue to rise over the next few years, BoE policy maker David Miles said. Miles also added that the key issue for the BoE was judging the moment at which diminishing slack in the UK economy and increasing cost pressures warrant raising rates from their record low 0.5%. Investors are doubtful, however, that a rate lift will command majority support until early 2016.

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