After making significant rallies, Aussie and Cable are now waiting for their respective central banks to weigh on benchmark rates.

For several days now, Aussie and Cable experiences an impressive bullish rally. Aussie supported by RBA's neutral stance is a rather interesting move after last year's extreme cuts. The Cable pushed by market's hope for rate hike after BOE offical mentioned the possibility. After two weeks ago New Zealand increased their bank rates, are Australia and UK will follow suit.

australia

 

Necessary Prudence

In contrast with last year trend, this year monetary authorities shows reluctance to loosen their policies. US The Fed commenced the year with tapering its quantitative easing program and rumours of rate hike afterward. Then there is European Central Bank that repeatedly refused to loosen although inflation record continue in unsatisfactory path.

It looks like being doves has become out-of-date. Advanced countries are becoming more confident in their economic condition. Central bank officials comments indicate that recovery has improved and consequently made it possible for the economy to survive a rate hike.

 

The Power of Australian Domestic Demand

China poses a big risk for Australia, but its domestic economy apparently strong enough to withstand it. Unemployment level stayed at 6% for the last two months and domestic consumption goes up, although China posted incriminating evidences of slowdown. This mean RBA no longer have to cut rates or depreciate Australian Dollar.

Last Thursday, Governor of RBA, Glenn Stevens, signaled that they won't tinker with rates again and refused to undermine the rising Aussie. China factor lowers expectation on foreign trades, but domestic demand increased, and it is hoped to sustain the economy this year.

In short, AUD for some time will start the rally again. However, be careful of Australian export-imports, rumours on US rate hike, and commodity price fluctuations, because those three could undermine AUD and push it back to the past lows.

 

Official Insight

Movements of GBP this week is marked by two events. The two are Bank of England official, Martin Weale, surprising statement and retail sales report.

Weale said that wage growth supports sustainable economic recovery. He continued on, Obviously, as the economy recovers, the interest rate isn't going to stay at half a percent indefinitely. That was the first event that pushed GBP against USD and reminded market players of BoE pledges to hoist rates once the economic recovery completed. What's more, in the next day UK retail sales report displayed impressive achievement at thrice than the past record. It concludes market confidence on the currency.

It could be said that BoE's official have seriously think about increasing rates, and that it is already within sight. But to actually do that, they may need incontrovertible proof that UK economy have accelerated as predicted by many at the beginning of the year.