Archived IMT (2010.10.19)

BANK OF CANADA holds dovishly and CHINA FINALLY RAISES RATES; for the first time since December 2007 means more losses for Chinas PBOC, which is sterilizing China-bound inflows by issuing higher yielding Chinese bonds to drain otherwise inflationary yuan. The problem arises when these proceeds are deposited in lower yielding US treasuries. Looking at my interviews of the past 2 months, I had been calling for an actual rate hike as hiking reserve ratios is NOT effective in containing lending. The rate hike, however, is a necessary stabilizer of real estate lending and an important step towards pushing depositors rates closer to zero (since inflation is now a full point above the 2.5% deposit rate). AUDUSD approaches 0.9730 target called seconds after the PBOC announcement . GBPUSD RISK BREAKING below 5-month TL support at $1.5700 after failing to close the week above $1.6. Weekly stochastics point to an ominous negative crossover, which could extend losses towards $1.53 if we see a weekly close below $1.57. All these calls have been announced on Twitter as Im still on the road.