Notes From Underground

Last night, the RBA voted to hold Australian rates steady at 4.75 percent. Governor Stevens showed us his usual, steady hand in the BANK‘s statement as he provided us with a global view that weighed heavily on Aussie monetary policy. The strength of the Aussie dollar kept the RBA from raising rates as the bank had unexpectedly raised rates in November and was content to see if the U.S. and European economies can overcome their current malaise. The Chinese and Indian demand were responsible for the best terms of trade for OZ since the 1950s and growth in other Asian nations was brightening the jobs and capex picture even more. In a few paragraphs, Governor Stevens and his comrades are very clear that Australia is the epicenter of the Asian growth story and the RBA will be watching for indicators that Australian employment is getting too tight for the BANK to move rates higher.

This morning, the Bank Of Canada announces its rate decision as Governor Carney–another central banker we hold in high regard–gives us insight into the global growth story through Canadian data. The consensus is for no change from the present 1 percent overnight rate. The strength of the LOONIE may stay the hand of the RBC but a 25 basis point rise would not surprise me. Although last week’s Canadian unemployment number was deemed TEPID and the U.S. economy operating at well below capacity, the booming global raw materials trade may move the BANK to act.

Again, the RBC‘s statement will be worth reading for its information on the world’s economic picture. If the BANK holds rates steady and the CANADIAN DOLLAR falls, it may be an opportune time to buy Canadian dollars if support levels are tested. Again, be prepared for just that opportunity.

The WIKILEAKS story is not something I have written about for its impact on the present, real-time world that I try to stay in step with has not been so readily affected. NOTES FROM UNDERGROUND has been very consistent in its views about Chinese economic data as being very suspect on a good day. In a 2007 cable from the U.S. ambassador in Beijing, he reports that Li Keqiang,a high-ranking Politburo member, termed China’s GDP as “man-made and unreliable.” It seems that Mr. Li uses electricity consumption, rail car loadings and bank loans to judge the robustness of the Chinese economy. If that is what one of China’s ranking political powers uses, then that is what NOTES will be watching, but with a weary eye.

It seems we get a better picture from places like Australia and Canada, countries that are central to providing the needed materials for growth across the developing world and also Brazil and most probably Russia. As China begins to structurally move from an exporter to consumer, this mix will change. At this juncture the raw material providers will be the mainstay of my focus. Goo goo g’joob.

Tags: Australia, Australian dollar, Canada, Carney, China, interest rates, Loonie, RBA, RBC, Stevens, Wikileaks

This entry was posted on December 7, 2010 at 7:29 am and is filed under Australia, Canada, China, Interest Rates. 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.