Stephen Koukoulas Rate Quotations

The Australian dollar should be doing better in the short term because the rate differential is still supportive.

The unemployment rate is likely to break below 5 percent in the months ahead. It will escalate the pressure on the Reserve Bank to raise interest rates, which in turn will be a shot in the arm for the Australian dollar.

The case for a rate hike is clearly much stronger. The rest of the world is raising interest rates and global inflation rates are edging higher. Fuel-price increases will flow through to inflation.

The case for a rate hike, while not totally compelling yet, is gaining a bit of momentum with these sort of numbers. On an interest-rate-differential and growth story, it should put the Australian dollar back in focus and see it move higher.

A mid-year interest rate cut is looking less likely. We had forecast a rate cut in July. That's looking a lot shakier after today's number.