Yellen agrees with you...BayView said:I can't see the USA rates going up much anytime soon;
Where are fixed rates funded from ? If O/S rates start to rise, then expect fixed rates here to rise too. And probably well before the variable rate rises.Federal Reserve Chair Janet Yellen said she still expects to raise interest rates this year if the economy meets her forecasts, with a gradual pace of tightening to follow.
Strong correlation between aud: usd.
Says who?Seeing as this is very likely in the medium and maybe even the short term .
This is what I'm trying to get to the bottom of. How it's all linked.Other central banks will have to follow suit or lose out as the strengthening USD will mean US has better terms of trade.
Point 2- generally yes, assuming there is no 'un-natural' US Fed programs such as QE programs which increase supply of the greenback and thus dilutes its value.This is what I'm trying to get to the bottom of. How it's all linked.
1) So USD interest goes up.
2) USD strengthens.
3) Other currencies weaken.
4) Other governments boost their interest rates to better compete.
Is that how it works, in a nutshell? Or have I missed something?
Not sure.. This stuff does my head in
1995 is a good historical reference and history often tends to repeat itself. Just a few months ago, petrol was at $1/LI think the AUD will be hit hard and then our living standards will drop dramatically as the cost of virtually everything will sky rocket. The RBA will have the flexibility then to keep rates as is or even raise them without fear of the effect on the AUD, also taking the heat out of the Sydney property market. Will probably feel a bit like 1995... property dead as a dodo, not much happening and if you want to buy a new car you'll need to put away a couple of years salary! The economy will then drift around a bit waiting for the next big bubble
I agree.. But does this mean the hole gets stitched up if we get to 8% hahaSays who?
Like I said in the aussie interest rates thread a while back. You won't see interest rates at 8% for as long as I have a hole in my ar$e. You won't see US interest rates shoot up for as long as I have a hole in my ar$e either.
I agree on both points. Although I wouldnt say the Chinese economy is in real trouble just yet but surely wobbly. It's more that monetary policy in China has favoured equity prices especially their stock market. This is causing overvalued shares. I think a lot of share investors there willvtake money outta shares and look elsewhere that's stable and consistent long term growth, and if the A$ is low, then aust real estate becomes an attractive proposition.....
China's economy is also in a lot of trouble despite the official 7% GDP growth figures (PMI shows a trend of manufacturing contraction in China and energy demand growth has been flat) They have been easing quite a few times this year already despite runaway stock and property prices.
RBA may not be able to raise rates even if the FED raises as the economy here may be too weak despite inflation from the dropping AUD.