Now what’s the word; lacklustre.....dull.....tedious..... I guess all are appropriate for the markets during yesterday because traders in the Far East and Australasia were waiting for the New Zealand interest rate decision and traders in the northern and western hemispheres were waiting for the Bank of England decision which comes today and the monthly bulletin from the Europe\an Central Bank; also released this morning. Even the sharp drop in the UK trade deficit wasn’t enough to move the markets to any significant degree but it did stop the slide in Sterling and the Pound ended the day at better levels.

Moody’s, the credit ratings agency surprised a few traders by downgrading their rating of Spain’s economy and maintaining their negative outlook on the Spanish economy overall. Whilst the idea had been doing the rounds as a rumour, the early move by moody’s was a bit of a surprise. Nevertheless, the move had clearly been largely expected so the Euro failed to weaken more than a smidgeon on the move.

The overnight action on New Zealand interest rates was pretty much bang on expectation; the Reserve Bank of New Zealand chose to stick with the script and cut their base lending rate by 50 basis points to 2.5% in an effort to support the economy through the trauma of the Christchurch earthquake. This move as so widely telegraphed by the Reserve Bank and by the NZ Prime Minister that the market reaction was small enough to be missed by anyone blinking at the time. It does though keep the NZ Dollar at the weaker end of its range.

Today’s big news in this part of the world is the Bank of England’s interest rate decision. I don’t know why we are all so het up over it because I cannot imagine the BOE monetary Policy Committee will go from a 6-3 vote for interest rates to remain on hold to a majority in favour of a hike in just one month but there is always that possibility. Sterling is as flat as an incredibly flat thing ahead of this announcement and, if the BOE doesn’t alter its policy, we won’t know how the voting went until a fortnight’s time when the minutes are released so the Pound is right to be boring. However, whilst I don’t suppose too many tradesr were boy scouts, being prepared in this market is all about managing the risk of a surprise and that is precisely what we are seeing this morning.

Elsewhere, the high privce of oil won’t have passed you by if you have had to fuel your car or your boiler recently and the effect is being seen in the value of the oil exporters as well. The difference is that they are making more money while we are all forking it out. Nevertheless, the Canadian Dollar is clearly benefitting from the extra income and we can see it pushing both the Pound and the dollar lower.

And we often talk about losing our way because the SatNav failed but there is another problem for navigation and that is that the North Pole is moving. It’s not an ice slide or anything but the magnetic pole is constantly shifting and it now looks like it is headed for Russia. It has been in Canada for the last 200 years or so but the rapidity of the move to Russia means our magnetic field could even flip over, making the magnetic North in fact the new Magnetic south. It’s all a bit beyond me but I guess it means that if we bump into another planet, we will repel it in the same way as any magnate does, so that’s good then. Or have I got this all wrong? I am worried about all these birds, whales and wildebeest who could end up migrating north for the winter though poor things.


Currency - GBP / Australian Dollar
Regular readers will have noted the continued strength of The Australian economy during the financial crisis despite the natural disasters that the country has had to face over the last couple of months. Australian employment has been particularly robust increasing for the previous 17 months! All that changed overnight as overall employment declined by 10,100 confounding expectations. However the details of the report were slightly stronger than the headline with an increase in full time employment and an unchanged unemployment rate. It is a volatile series at the best of time and the market was little moved.

With little on the macro front to excite investors I would expect the current ranges to be respected. Technically we are still trapped below the trend-line going back to the middle of September which is currently showing resistance around A$1.6130 and until that level breaks we cannot confidently expect higher exchange rates for Australian Dollar buyers.

Ricky Nelson



Physics conundrum of the day
If you are in a spaceship that is travelling at the speed of light, and you turn on the headlights, does anything happen?
Steven Wright