Economic growth overshadows international woes
15.31 AEST, Tuesday 21 August 2012
Economic growth overshadows
By Ben Taylor (Sales Trader, CMC Markets)
The RBA minutes today show that our economic growth has overshadowed international woes. While the statement didn’t mention anything new it did reiterate the markets view that our central bank will not cut rates this year as our inflation rate remains consistent within target and growth remains close to trend.
The high Aussie dollar did however get a mention as it defied convention rising as commodities fell and the global outlook weakened.
As the situation in Europe continues to stabilise we continue to see money flowing out of bonds and off the sidelines back into the equity market albeit still in low volumes. Today has been no exception: we broke 4400 today revisiting the highest level since May this year. Confidence is back in a big way as Angela Merkel’s support for the ECB president Mario Draghi suggests the market is now pricing in a lot of good news to follow.
The suggestion that the ECB will come to the bond buying party could however be squashed if the ruling by the German court upholds the constitution challenge to participate in the ESM.
The Bundesbank remains opposed to the ECB buying distressed Eurozone bonds. Distressed nations would also need to ask for help from the ECB before help would be forthcoming, something that Italy has insisted it won’t need to do.