Morning Report Thursday 24 July 2014
Where does value lie in Financials as interest rates rise again today in New Zealand?
This morning, interest rates rose in New Zealand by 0.25% to 3.5%, this is the fourth increase this year. The current rhetoric around Australian interest rates is mixed, with yesterday’s inflation data at the top end of the RBA’s acceptable band, hence pushing up the $A almost 1c for the week to around 94.5c as the market factored in a diminishing possibility of further rate cuts. The strong $A remains a major headache for the RBA and I believe a major reason for the significant underperformer by the ASX200, if the $A was at 80c I believe the ASX200 would be closer to 6,000.
I personally believe that the next move in Australian interest rates will be up and when they start as we are witnessing in New Zealand, the speed of ascent may surprise many, do not forget how fast they fell – see charts 1 & 2 that are VERY similar.
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