Record low interest rate rolls into its second year

GBP to AUD 4 Hour

He noted authorities there easing policy, while heeding risks in the financial sector. Weston said the kiwi dipped because the "market expected a slightly more downbeat assessment but that didn't happen".

There are few signs that the current trade dispute between the US and China will be diffused, as US President Donald Trump and Chinese state media have been ramping up their rhetoric. Forward indications point to a period of sustained low interest rates. The kiwi dollar drifted lower overnight and "we doubt it will have enough momentum to break through those levels today (unless the RBA dramatically surprise), with markets waiting for direction from the RBNZ later this week". The GDP for 2018 and 2019 is expected to average slightly above 3 per cent. "This should see some further reduction in spare capacity".

Japan, which has low immigration, is experiencing a flatlining economy while growth was also flat in the United Kingdom, which has a population growth pace 0.6 per cent. One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high.

Canstar finance expert Steve Mickenbecker said the increases due to higher wholesale funding costs had been about 0.1 per cent, but "what is noteworthy is that the changes flow through to existing customers, not just new borrowers".

The AUD/USD rate was quoted 0.14% lower at 0.7415 Wednesday and the Pound-to-Australian-Dollar rate was also down 0.15% at 1.7407.

Some small and medium-sized banks have been raising mortgage rates to cover higher funding costs in the wholesale market, though two of the majors have actually trimmed their rates in a push for greater market share.

The outlook for the labour market remains positive. Employment growth continues to be faster than growth in the working-age population.

"Consumer sentiment has a significant impact on the economy and while the latest Westpac Consumer Sentiment survey reported the most positive reading since November 2013, the overall level of sentiment is below the long-term average as consumers continue to feel pressure from sluggish wages, rising electricity and petrol prices and declining dwelling values. Consistent with this, the rate of wages growth appears to have troughed and there are increased reports of skills shortages in some areas". There, the Reserve Bank of Australiadowngraded near-term inflation expectations while simultaneously upgrading more outward looking estimates. Over the past year, the CPI increased by 2.1 per cent, and in underlying terms, inflation was close to 2 per cent.

'The central forecast is for inflation to be higher in 2019 and 2020 than it is now'.

The domestic case for a hike has also been weakened by a sharp slowdown in the once red-hot housing market in Sydney and Melbourne. "There is competition for borrowers of high credit quality".

Conventional wisdom suggests that a renewed sell-off in the AUD/USD should be forthcoming in the not-too-distance future, owing to the widening interest rate differentials between the US and Australian economies.

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