Archived IMT (2010.10.05)

RBA SURPRISES WITH A HOLD, BoJ CUTS RATES; Aussie is the biggest loser of the day as the RBA countered 75% of the market by holding overnight rate unchanged at 4.50%. Although the RBA kept the door open for further rate hikes (it always did that in the current cycle) it did sound a tad dovish on the inflation side by indicating " Inflation has moderated from the excessive pace of 2008. The effects of the rise in tobacco taxes aside, CPI inflation has been running at around 2 per cent over the past year. That looks likely to continue in the near term." This in IN CONTRAST to the September announcement in which it stated " Through to mid 2011, underlying inflation is likely to be in the top half of the target zone, while CPI inflation will probably be just above 3 per cent for a few quarters due to the impact of the tobacco tax changes." Readers of my tweets and previous IMT were warned about an RBA hold, which I argued with RBA needing to wait for the next CPI report due later this month and that it would be reluctant to accelerate further Aussie gains. I also emphasized on TWITTER/alaidi and the forum about the bullish prospects in GBPAUD, which is now nearly +170 pips, but I do see further gains towards 1.6650 and 1.6800 ESPECIALLY if today's UK SERVICES PMI emerges higher than 51.5. BoJ slahed its policy rate from 0.1% to between 0% and 0.1%, while creating a temp fund of about 35 trillion yen ($418 billion).to buy various financial assets. Yen declines are seen limited especially if Asian/European markets remain in sell-mode and so USDJPY remains capped at 84.40.