Morning Report Tuesday 3 February 2015
This morning, 15 out of 19 economists surveyed are predicting no rate cut at 2.30pm today by the Reserve Bank of Australia (RBA). However, my feeling is who cares, we will get two cuts (0.5%) this year if all economic conditions remain the same, the question is simply when. I believe the RBA will not cut rates today as their initial main concern, the $A has already fallen from 94c to 78c in 5 months making Australia more competitive on the world stage. To me it makes sense for the RBA to sit back for a month, evaluate how the world economies are unfolding in 2015 and importantly to see if housing prices, a concern for the RBA if they cut rates, remain subdued – the RBA however do not always appear logical!The stock market is playing a very simple game at present, both chase yield and cover shorts in the resources sector, this equals the very bullish combination we are currently witnessing.
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