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FX CURRENCY WATCH


Chart.3 China GDP


the impact on oil demand is not that elastic. Furthermore, the recent increase in economic growth in Japan is not necessarily sustainable in a global slow growth environment. To summarize, Japan is not expected to increase its purchase of industrial metals and coal substantially.


Finally, we have to keep a close eye on the economic situation in the US. As the leading economy globally, the FED has taken measures, three times during the last two years, to buy bonds within the context of massive bond purchasing programs (QE). Te rationale behind this was to push down yields and support the US economy. Tis worked out quite well, but now, as the US economy looks pretty stable discussions have begun to scale back these QE measures. In our opinion it is too early because of the continued weak employment situation in the US and the generally low growth environment. We are expecting scaling back to occur at the end of the year the earliest, or the beginning of next year.


All in all, the global economic environment is not set to increase commodity demand.


Let’s have a more precise look at the Australian economy. During the healthy economic period in the 2000s the real estate market went up substantially.


Tis acceleration has been stalling since 2010. However the 48 FX TRADER MAGAZINE July - September 2013


Chart.4 Price Index of Established Houses, Weighted Average of 8 Capital Cities (2003-2004=100)


market has not corrected significantly. Tis is a risk because a fast price decrease could create economic disruptions in Australia, which would also influence the currency negatively.


Te actual economic situation is deteriorating due to a slowdown in commodity prices. Many mining companies have been forced to cut back their investments and focus on improving productivity instead. As a result, projects to the sum of A$ 150bn have been cancelled since April 2012. From the overall GDP growth rate of 3.1% in Australia, mining investments contributed around 1.9%. Tis shows us the high dependency on the commodity sector with all the associated opportunities and risks.


As a result the unemployment rate in Australia has picked up slightly from 4.96% in April 2012 to 5.55%. During the 2000s inflation came down significantly from 6.1% in 2000 to 1.18% in 2009. Ten, in 2011 inflation grew to 3.5% but came back down again to 1.2% (Q2 2012). Recently the rate picked up again towards 2.5%. Domestic demand is actually subdued and policy makers are not expected to do any significant fiscal policy stimulus packages as they did in 2009.


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