Last week the market rallied but the real gains came on the back of the Reserve Bank cutting interest rates to 1.75% on Tuesday this week. Followed up by the budget this gave the market some expectation that the economy will pick up. We can also expect to see more cash move into the market over the coming months as investors look for a high yield.
The interest rate cut was on the back of negative inflation last month and the Australian Dollar rallying from $0.71 at the start of March up to $0.78 being the high of April. Soon after the rate cut was announced we saw the dollar start to drop. This is due to funds leaving Australia looking for higher rates elsewhere.
This rate drop should provide a platform for increase exports providing a boost from the economy. With the budget out last night there are a number of measures which we will discuss separately which should provide small business the opportunity to look at expanding.
Our market is still inside the trading range it has been sitting in since August 2015 although it is currently trading at the higher end of the range. With an election due in July and the 2016 Budget still fresh I expect that the market will maintain the current trading range in the short term as investors wait for the dust to settle before making big commitments.