The Australian dollar held near two-month highs on Monday bolstered by speculation the US interest rates have peaked in sharp contrast to Australia where the cash rate is widely expected to rise this week.
It took a soft nonfarm payrolls number in the US to weigh on the greenback and bond yields, lighting a fire under the Australian currency, he added. Meanwhile, the gap between US two-year to 10-year yields deepened to minus 29 basis points, from 18 basis points. An inversion – when short-term borrowing costs exceed those on the longer end – in that part of the curve indicates a looming recession.
Should the central bank opt to keep rates on hold, the governor would need to explain “emphatically and explicitly” how the “inflation miss” was not “material”, said independent economist Saul Eslake, who expects a rate increase on Tuesday.
Source: Loan Digest (loandigest.net)
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