Archived IMT (2010.04.05)

TONIGHTs RBA DECISION is said to be a close call (we expectc +0.25) due to recent data weakness (retail sales declines, trade deficit widening) and a report by Hedge Fund consultancy Medley Advisors (Robert Medley was advisor to George Soros) arguing for the lagging nature of housing prices. Fed funds futures price a 60% chance of a 25-rate hike to 4.25%. Last weeks surprise TV appearance by RBA Govenor Stevens warning over the overheated property market and the need to normalize interest rates at incremental steps may seal the deal for the fifth quarter of a point rate hike. Despite the major banks rate hikes of their own mortgage rates, applications for new mortgages remained on the rise. Another dynamic likely to push RBA into tightening is the latest showing of strong Chinese data, tempering fears of a slowdown in Australias major trading partner. Regardless of todays decision, RBA watchers will scrutinize the statement for any signs of concerns with the rising Aussie and the slowdown on the retail sector. AUDUSDs lower highs since November and the 5-month trend line resistance at 0.9220, suggests broadening cautiousness. But a decision to raise rates may trigger a short-term pop towards 0.9230s before retreating lower on what dealers may interpret as a an intermediate pause in tightening due to the emerging signs of a slowdown in consumer spending. AUDJPY showing its first sign of a retreat after 6-daily gains at 87.15.