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Market Update

Rates around the world are slowing their upwards momentum.  Yesterday the ECB voted to keep rates unchanged, citing a strong Euro$ and weak US housing market as threats to the growth of their economy.  The global reach of the lowly Floridian home speculowner has been nothing short of incredible, as central banks around the world are citing them in their reasons to keep rates unchanged (or lower).  If you are looking to point out what's different about this cycle, it's clearly the ease of worldwide capital flows.  Everyone down to the smallest Japanese household investor can now click their way into a Norwegian Krone denominated fund.  The speed and ease of these flows is obviously having vast implications on the global markets.  If you ask me, it's actually saving American markets from absolute turmoil, as many home lenders were shipping their risk overseas, helping them spread out the time-bombs and avoid too much localized damage. 

 

  Tuesday the RBA (that's Australia) voted to keep rates unchanged, citing similar reasons.  Aussie retail sales and inflation indicators are ticking up too, so the pressure was on for them to actually raise rates (they kept a tightening bias).  They must see the dangers of market turmoil to have left rates unchanged.

 

    Generally the AUS$ and the CAD$ have traded together, but as Canadian investors have been piling into the greenback once we hit par, the AUS$ has continued to rise, and is gaining strength as the CAD$ hit a wall.  The AUS$ is still trading in the lower range of it's Canada cross over the past few years (currently @ 0.8830).  It has traded as high as par.  With their overnight rate at 6.50%, their ten year bond yielding 6.12%, and AC/DC still cranking out quality arena rock, the incentive to own Aussie dollars is strong.

 

 

 

 



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