Australian Central Bank Begins Global Rate Cutting
by Richard Lee
Last night, policy makers at the Reserve Bank of Australia voted to be more than accommodating to the current blockage of free lending. In an aggressive move not seen in 16 years, Governor Glenn Stevens trimmed the overnight cash rate by one whole percentage point, double what consensus estimates had pitted for the decision. Market moving, the cut to 6 percent follows a quarter point decrease last month which is likely to perpetuate similar moves by central bodies in the UK and US. The Bank of England is already expected to cut rates by at least 25 basis points later this week, widely supported by previous individual statements, with the FOMC estimated to be targeting a 50 basis point reduction on October 29th. With Korea and Thailand also reviewing their interest rate policies this week, some question whether we are actually seeing coordination among global economies in an effort to stem the carnage. Note to self: G7 ministers set to meet this Friday in Washington.
All in all it looks as if conditions may finally be at a breaking point and policy makers will be receiving what they’ve been working for. Overnight dollar LIBOR has reached another peak well above 4 percent with three month paper ascending to 4.32 percent over the previous one month score of 2.80 percent. Although risk may not be back on the table, current accommodations may be working their way into global systems, helping to at least spark some serenity in an otherwise tumultuous 10 months.
Rising in the morning, the GBPJPY cross continues to look bearish in the medium term. Finding near term support at the 178.00 figure, bearish proponents may be looking for another opportunity to sell as the pair rises to resistance circa the 182.00 barrier (previous support break).
Tags: Australian Dollar, Coordination, G7 Meeting, Rate Cut
About the Author - Richard Lee
Richard C. Lee is the Chief Currency Strategist for OnlineForexTrading.com. Employing both fundamental and technical models, Richard has previously been featured on DailyFX.com, Bloomberg, FX Street.com, Yahoo Finance and Trading Markets.com. In analyzing the markets, he draws from an extensive experience trading fixed income and spot currency markets in addition to previous bouts in options, futures and equities.
