Archived IMT (2010.02.01)

The upcoming RBA decision (due 3:30 am GMT) is expected to produce a 25-bp rate hike to 4.00%, but we allow for as much as a 40% chance of no hike at all (60% chance of a 25-bp tightening). The upside impact on AUD shall depend upon the risk appetite prevailing in the Tuesday Asian equity session. New home sales fell in 4 of the last 5 months, but prices of homes and general indices remain worryingly aggressive for the central bank.

We have seen in December for instance how a much anticipated rate hike failed to prop the Aussie higher due to the prevailing risks with Greece & Dubai weighing on appetite. While a 25-bp hike could be expected to lift AUDUSD and AUDJPY towards the 89.80 and 81.30s resistances levels respectively, these gains will largely depend upon the equity sessions prevailing in Asia.