RBA

Australian Banks remain highly profitable.  Also that mortgage arrears are likely to rise from low levels.  There is no case for government intervention in the mortgage market.

Signs of improvement in securitization market.  Look for minutes below:

http://www.rba.gov.au/

The RBA will release the minutes to the Boards June Interest Rate setting meeting.  The AUDUSD has rallied up in anticipation of more hawkish comments.   

For what it is worth, after the meeting Glenn Stevens made the following statement:

"At its meeting today, the Board decided to leave the cash rate unchanged at 7.25 per cent. 

Inflation in Australia has been high over the past year in an environment of limited spare capacity and earlier strong growth in demand. In these circumstances, the Board has been seeking to restrain demand in order to reduce inflation over time.

Tonight Glenn Stevens, Governor of the Reserve Bank of Australia speaks at 6:00 PM to Parliament.  His comments will be important especially in light of the no change in policy at the last meeting and what was thought to be softer comments on the economy.

Also speaking tonight is the Fed's Janet Yellen at 8:00 PM.  She will be speaking on the US economy at Stanford University.

Finally, Feds' Mishkin will be speaking in NY at the Princeton Club. 

Given the magnitude of the employment report tomorrow, the comments out of the Fed officials will probably not be market moving.  Mr. Stevens testimony, however, has the potential to cause some action

8 out of 11 economists expect a Reserve Bank of Australia rate hike at the next meeting in February.

Not that distressed by the strength of the AUD.  

China can cope with slower G7 growth. 

AUDUSD remains supported on comments

An RBA governor is on the wires saying uncomfortable high inflation evident in Australia.  The AUDUSD has jumped from 0.8785 to a high of 0.8824 on the headline.

The RBA kept rates unchanged last night at 6.75%.  In addition to the rate announcement, the RBA announced it would release a statement explaining the decision.

Highlights of the statement:

The dollar got hit hard last night as China's top political advisor, Cheng Siwei said that China should diversify its 1.43 trillion FX reserves into buying strong currencies like the EUR.  Later Cheng clarified his statement and said he did not mean to say we should buy more EUR's, but did not elaborate.

The RBA raised rates by 25 basis points to 6.75% as expected. AUDUSD at 0.9285.  Comments are hawkish on inflation.  Few signs of growth slowing. Rise in exchange rates will help contain price pressures.