We are always impressed with the
precision with which central banks, statistics bureaus and commercial rating
and research organisations are able to time their releases. The economic
calendar is an invaluable tool for traders, made all the more so by the fact
that the various releases can normally be depended upon to come at exactly the
time they are supposed to, according to said calendar. To the minute.
Sometimes it can be noted that market
participants will take a view on what the relevant announcement will be, and
this will be reflected in the exchange rate movement in the run-up. Sometimes
they get it right, and very often they get it wrong. On occasion, the move
immediately after the announcement can be counter-intuitive, and very often,
for the more important announcements, there will be considerable short-term bidirectional
volatility as the institutional analysts attempt to work out the consequences.
Yesterday morning, in GMT terms, the
Reserve Bank of Australia decided, against the widely held expectations of the
Forex market, to forego an interest rate reduction. As a cut had been priced
in, this would have been expected to cause the Aussie to rise, which it did,
except that in this case the rise was in the moments before the announcement was made.
Now
commentators and traders are calling foul. There is a strong suspicion that
there was an information leak to selected market players before the
announcement. The relevant authorities in Australia are investigating. It is to
be hoped they will be able to ensure that such skulduggery will be nipped in
the bud.
Housing
bubble fear behind surprise decision
As the governor of the Reserve Bank
of Australia, Glenn Stevens, is on record as being less than enamoured of the
so-called macro-prudential policies that other central banks have been using to
limit the issuing of mortgages for house purchase, such as loan-to-value limits
and other restrictions, it comes as less of a surprise to find that he and his
colleagues have decided to continue to rely on the core interest rate to
discourage a housing bubble Down Under.
This is the main reason for not
reducing the cash rate. There are compelling economic arguments for such as
reduction, but we will either have to wait for it, or the Australian economy
will have to continue to grin and bear the effects of a high Aussie dollar.
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