I was surprised at today's RBA decision not to lower rates. I am not sure what is driving the RBA's decision making. Don't they understand that lower rates will lead, in the short term at least, to more less competitive industries? Today's decision can only put more unwanted pressure on industries like tourism and wine.
The UK is expected to break out another bottle of QE this week. As this announcement is widely expected, I expect that when it comes it is unlikely to move the GBP needle much. However over the medium term, it will further undermine the GBP.
These changes should see a continued strengthening of the AUD/GBP, which will be brilliant if you are planning to go to the Olympics in July. By then we could be at the $1.40 level.
