Canada Points to Lower AUD

The front page of today’s Australian Financial Review has a headline about rate cuts in Canada and New Zealand being a precursor to Australia.  Indeed Canada, like Australia, is highly dependent on resource exports for its economy.  Wolf Richter of Wolf Street summarised yesterdays news well:

“The Bank of Canada took a good look at the Canadian economy, saw it was sinking into the mire, glanced at the collapsed prices of commodities, particularly oil, saw how they were wreaking havoc in Canada, and then looked at the global economy, particularly at China and the US, and it freaked out.

It cut its overnight rate 25 basis points to 0.5%, the second rate cut this year, and attached a gloomy view about the Canadian economy with as it said a “significant downgrade” from its last estimate issued only in April. Things are heading south fast.” 

As we deal with falling commodity prices we need a lower dollar and the RBA, as does Canada and NZ’s central banks, knows this.  This all adds enormous weight to extraordinary measures being employed to lower our dollar further.  We saw a 6 year low this week at 73.5 but we have a number of world banks calling for 60’s by next year.  As we’ve discussed many times this should be music to holders of gold and silver.