19 Feb 2015
AUD/USD sold-off as S&P warns of Aus rating downgrade
FXStreet (Bali) - AUD/USD has sold off aggressively over half a cent in the blink of an eye, falling from 0.7840 resistance, down below 0.78 at present, setting a session low of 0.7790.
During this week, there has been talk of solid selling interest ahead of 0.7850. The selling, however, has come as S&P warned that strained Australia budget puts the country's credit rating at risk. An article by Greg Gibbs, FX Strategist at RBS, warned about the risks of a possible Australian credit rating downgrade (see key paragraphs below).
"Australia has run sizeable fiscal deficits since 2009 and has continually downgraded its fiscal outlook. It has failed to deliver on any significant policy reform according to most commentators since the introduction of a Goods and Services Tax in 2000, it has ridden the back of a resources investment boom and failed to invest sufficiently in non-mining infrastructure."
"State governments have struggled to stay in government and deliver new infrastructure spending plans, dealing within their own limited budget flexibility. The deep rate cuts by the RBA have pumped up house prices and renewed mortgage debt growth faster than income growth from already excessive household leverage."
"With the deep fall in its terms of trade, and broadening political and economic uncertainty, it is not out of the question that its triple-A status is questioned in the year ahead."
During this week, there has been talk of solid selling interest ahead of 0.7850. The selling, however, has come as S&P warned that strained Australia budget puts the country's credit rating at risk. An article by Greg Gibbs, FX Strategist at RBS, warned about the risks of a possible Australian credit rating downgrade (see key paragraphs below).
"Australia has run sizeable fiscal deficits since 2009 and has continually downgraded its fiscal outlook. It has failed to deliver on any significant policy reform according to most commentators since the introduction of a Goods and Services Tax in 2000, it has ridden the back of a resources investment boom and failed to invest sufficiently in non-mining infrastructure."
"State governments have struggled to stay in government and deliver new infrastructure spending plans, dealing within their own limited budget flexibility. The deep rate cuts by the RBA have pumped up house prices and renewed mortgage debt growth faster than income growth from already excessive household leverage."
"With the deep fall in its terms of trade, and broadening political and economic uncertainty, it is not out of the question that its triple-A status is questioned in the year ahead."