Notes From Underground

Our readers need to be aware that at 9:30 CST, the Aussie Bank will let us know what their policy on interest rates is going to be. Until last week, the market had a high probability that they would raise rates up to 4%, but with risk off trades dominating the landscape the probability has dropped. It seems that there is a consensus of a 65% probability for a rate raise. If the Bank does nothing, look for support levels (consult your technicals) for we think nothing became anticipated with last week’s commodity selloff.

If they raise rates, the AUSSIE ought to outperform on the crosses but we will watch and look for AUSSIE support. If the global growth story is over, then of course the AUSSIE will weaken but we do not believe we have reached that point yet. Later this week we will get the NORGE BANK and then Thursday the ECB and the Bank of England. For the record, we saw the European credit spreads narrow today as the German/Greek differential narrowed in 20 basis points and the Spanish and Italian speads to the German Bund about 8 basis points. Just keeping an eye on market sentiment.

Tags: Aussie, ECB, Norge Bank

This entry was posted on February 1, 2010 at 3:32 pm and is filed under Currency, Debt Market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.