The Fed's open-ended quantitative easing (QE3) adds to pressure on the Reserve Bank of Australia to cut interest rates, says Shane Oliver, Director of Investment Strategy and Chief Economist at AMP Capital. "The combination of higher spot commodity prices and potentially the resumption of carry trades could see the AUD pushed higher, which is the last thing Australia needs now, particularly if bulk commodity prices remain subdued on Chinese softness," Mr. Oliver says; "as a result it adds more pressure for the Reserve Bank of Australia to resume rate cuts - which we expect next month." At the same time, Mr. Oliver expects some modest ongoing upward pressure on bond yields if QE3 boosts global confidence and generates some reversal of safe-haven bond buying."
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