Reviewing the Aussie dollar fundamentals

The fundamentals of the Aussie Dollar are still signalling further weakening for the currency in the next few of months. Technical Research managing director Max McKegg notes that money markets are actually pricing in a 100% change the RBA will cut its 2 per cent policy rate by 25 basis points by the end of the year. One of the macroeconomic reasons for money markets to price this cut, which would continue to weaken the Aussie Dollar, is the terms of trade. "The relentless decline in commodity prices has sent the terms of trade index under its 2009 level", says Mr McKegg. On the other hand, the Australia’s exchange rate, as measured by the trade weighted index (TWI), is still well above its 2009 low and the real (i.e. inflation-adjusted) rate has a lot of catching up to do, according to Technical Research managing director. To read more visit: (VIEW LINK)