Two lines in the RBA Minutes and a Holiday Rally

Two lines in the 3rd to last paragraph of the Reserve Bank of Australia’s minutes for December set off a holiday rally in not just the Australian currency but in the other financial and commodities markets as well.    

The RBA actually lowered their interest rates becasue of concern for the continued crisis in Europe but did concede: “On the one hand, there had been further evidence that a major investment boom was in progress and the overall economy was expanding at a pace broadly in line with trend. Australia’s main trading partners were also still recording solid growth. This did not suggest any strong need to cut interest rates”.

We can see from the intraday chart of the Aussie above that the market took this observation seriously and rallied nearly 2%. The S&P 500 was up 2.5% as of this writing.

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Jay Norris is Chief Market Strategist at IBTRADE, and the author of Mastering the Currency Market, McGraw-Hill, 2009 and Mastering Trade Selection and Management, McGraw-Hill, 2011