Daily Market Commentary - 27 January 2012
Daily commentary
The Australian dollar, the highest yielding industrialized currency with an overnight lending rate of 4.25%, resumed its climb to new relative highs through Wednesday and Thursday after treading water on Tuesday. Specifically, the Aussie opened Friday’s Asian session near 12-week highs against the U.S. dollar, similar dozen-week highs against the yen, and new historic peaks against the U.K. pound; gains which were replicated in most measures of riskier assets when juxtaposed against their respective haven counterparts.
The market’s persistent and bolstered risk appetite took its cue from the U.S. Federal Reserve’s monetary policy decision on Wednesday. The Fed’s latest analysis expected a longer economic travail for the world’s largest economy, and interest rates were likely to remain depressed until 2014 (the Fed expected rates to rise by 2013 as recently as November 2011). The premier central bank also left the door open to a third round of quantitative easing (where the bank would actively engage in asset purchases to deflate credit strains from the shadow banking system) to help rejuvenate its forecasted anaemic economy. Traders globally interpreted the Fed’s willingness to proactively spur America’s economic activity with glee, and bid prices for equities, commodities and yield-heavy currencies higher.
Looking ahead, investors should be particularly wary of today’s Japanese December CPI rates, German December import prices, Swiss January leading indicators and American Q4 GDP report. There are no Aussie-specific reports expected.
Key Releases
| Indicator | Actual | Forecast | Previous |
|---|---|---|---|
| NZ RBNZ Interest Rate Decision (Jan) | 2.5% | 2.5% | 2.5% |
| US Fed Interest Rate Decision (Jan) | 0.25% | 0.25% | 0.25% |
