Today's trading could be looked at in two parts. The first part of the day was dominated by news that the IMF had sold somewhere in the ballpark of 200 metric tons of gold to the Reserve Bank of India. This news pushed spot gold to eventual session highs of $1066.00 as the dollar weakened in the wake of the move. EUR/USD drove 40 pips to session highs of 1.4810 on the softer dollar.
GBP/USD made a move from 1.6380 to just shy of 1.6420 on the data, and not to be left on the wayside, the yen crosses joined in for Asian highs. EUR/JPY flirted with 134.00, GBP/JPY jumped to 148.55, and AUD/JPY hit a high of 82.15.
This dollar sell-off did not last however, as the second phase of the day's moves were set to be put in motion by the RBA Rate decision.
Most expected a 25 basis point rise in the overnight call rate in Australia today. Some traders, familiar with the leader of the pack mentality of the RBA even had expectations for a 50 basis point move. The end result was that the RBA raised the rate by 25 basis points to 3.50% as expected, but it was the RBA statement following the release that offered the surprise to the markets. RBA Governor Stevens noted that the Australian economy was stronger than expected, but hinted of the gradual strengthening of rates which translated to the RBA skipping a probable hike in December. Traders noted that the RBA has never raised rates 3 months in a row, and with the RBA taking January off, that would mean the market needs to wait until February for the next boost in rates.
The AUD/USD collapsed from 0.9090 levels to lows under the 0.9010 mark. Across the FX markets, the dollar and yen got a reprieve as traders looked to buy into the perceived safety of those currencies. AUD/JPY slid from 82.10 to 81.25 on the data and the AUD/NZD skidded to 1.2480 lows after previously residing closer to 1.2575.
Look for more potential fireworks out of Australia tomorrow with the release of Building Approvals and Retail Sales.
