The Reserve Bank of Australia has remained optimistic of late as the value of commodity prices has settled. However there is a little cause for concern as the currency continues to strengthen the exports have slowed. Australia is a major exporter of raw materials and the general global slowdown may start to take its toll on the economy.

The RBA have a difficult challenge currently as one of the only countries in the developed world where you can gain interest on savings. This has meant a lot of investment being put into the Aussie Dollar which has increased the strength. If the RBA were to cut interest rates again then investors may no longer get the returns they want and there could be a major sell-off which would dramatically weaken the Aussie.

China nerves close to tipping point

There is plenty of data coming from China this week and there is a general concern about the state of the economy. The huge amount of debt China has, appears to have become apparent and it looks like concerns may become realities. This week there will be trade balance data with an expectation of a reduction of exports and an increase in imports. China has become an economy built on lending and there are major fears of a housing bubble collapse around the corner.

President Xi Jinping last week in a meeting asked policy makers to “control asset bubbles”, which many believe was him directly addressing the housing market. The stock market crash at the start of this year in China was down to the high amount of household debt levels. China’s influence on the Australian market is very significant as its biggest trading partner and if there was to be a crash in China the Aussie Dollar would weaken dramatically.

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