Morning Report: 8:15 London
• This morning the Reserve Bank of Australia voted to keep rates on hold at 4.75%. In their accompanying commentary, their assessment of the impact of the recent floods was less downbeat than expected, prompting calls for a rate hike in 2011. Australia already has the highest rates in the Western world and the floods are expected to have an impact on the Australian economy in the short term. Looking further out, many analysts are now predicting that things will soon stabilise with one, possibly two rate hikes by early 2012.
• The commodity heavy Australian economy is also being boosted by a commodity prices such as Copper recovering over the last week. The AUD/USD is the morning's top gainer, up 0.70% with the AUD/JPY up 0.44%. The NZD/USD is riding on its neighbour's coat tails up 0.44%.
• Continuing on the commodity theme - Gold is holding above support at $1325 and Brent crude continues to trade above $100 per barrel.
• The US dollar is generally weaker with the EUR/USD up 0.35% and the GBP/USD up 0.29%. The USD/CHF is down 0.32%, with the USD/CAD benefiting from rising commodity prices and down 0.4%.
Coming up today:
• Already today, the UK Nationwide House Price Index dropped less than expected month on month, coming in at -0.1% vs the expected -0.3%.
• UK manufacturing PMI will be closely followed at 09.30 along with the politically charged net lending to individuals. PMI is expected to coming in at 58.0. It’s worth noting that UK Manufacturing PMI has come in above estimates in 9 of the last 12 months, though September 2010 saw a massive miss.
• US ISM manufacturing PMI follows at 15.00 with a small drop to 57.8 expected.
Bet Idea:
• The AUD/USD is currently setting itself up for three days of back to back gains for the first time in 2011. The pair is above the parity line (1.000) once again and after failing being range bound for most of January, traders will be hoping for some sort of trend to set in soon.
• The path of least resistance might be for a trend to appear to the upside, making a HIGHER bet a possibility. There is some resistance overhead so there may be some short term pull backs – Making a longer term trade more desirable.
A HIGHER bet predicting that the AUD/USD will close above 1.0150 in 62 days time could return 158% if successful.
Summary:
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