The RBA has been waiting for the Fed’s help to take the A$ lower and this proving to be a long wait. This stance may not yet have come at much cost but it is prolonging the agony. Economic growth lies somewhere in the amber zone, corporate earnings lack a meaningful top line catalyst and there is no strong valuation signal for the market. This backdrop is a trifecta of averageness that does not look like it is about to change.
The A$ is going to need more than jawboning to get it substantially below US$0.70 in a world driven increasingly by negative rates and narrowing policy divergence. We worry the market knows what the RBA’s game and the risk is that the currency never quite gets as low as we want and that equities don’t get the boost they clearly require.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
