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1.Market Observations, 8.Was Sticky

5 Oct 2018 (AFR) – Higher US rates, lower $A could lift inflation for RBA

(5 October 2018, AFR, p1, by: John Kehoe, Jacob Greber , Mark Ludlow)

‘Rising US interest rates fuelled by Donald Trump’s tax cuts stimulating the American economy could soon push the Australian dollar below US70¢ and gradually lift local inflation to help the Reserve Bank of Australia increase borrowing costs next year. The Australian dollar dropped to a 2½ year low of US70.78¢ on Thursday as the 10-year US Treasury yield, a global interest rate benchmark, posted its biggest daily jump – 0.12 of a percentage point – since Mr Trump’s election win in November 2016. A falling Australian dollar and higher oil prices may create a perfect storm to push local petrol prices above the $2 a litre mark, costing motorists and businesses, analysts said. A flurry of upbeat economic reports on the US services sector and rising employment coincided with major US stock market indices, including the Dow Jones Industrial Average, hitting records. It follows e-commerce giant Amazon this week…’

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