On the surface, it seems the civil unrest in Egypt hasn't had quite the same effect on investor sentiment as we saw late last week. Key commodities advanced and US indices recorded solid gains with market participants seemingly putting the turmoil in Egypt to one side to concentrate positive earnings from corporate America, namely Exxon Mobile.
Nevertheless, we can attribute the pressures on commodities such as oil to the tensions in Egypt as investors remain nervous about the possibility of an interruption to shipments through the Suez Canal, which is a major thoroughfare between the Mediterranean and Red Sea's. In contrast the safe-haven buying we saw on Friday, a pickup in sentiment came at the expense of the greenback which underperformed against major counterparts.
Sterling was also a standout performer as Bank of England committee member Martin Weale one again expressed a need to combat stubbornly high inflation with a modest rise in benchmark interest rates. The pound rallied through US$1.60 from early lows just above US$1.58.
Across the channel, rates speculation has also continued to put some steam behind the Euro. Preliminary estimates showed Consumer prices rose at an annual pace of 2.4 percent in January - slightly higher than the 2.3 percent expected and beyond the ECB threshold of 2.0 percent. Since Monday's open, the Euro has crossed two big figures against the greenback rising to overnight highs of US$1.3740 but has since settled back around current levels of US$1.3690
The Aussie dollar once again made a convincing break of 99 US cents to highs of 99.9 US cents and remains on a solid footing to continue an upward trajectory in domestic trade. The day ahead with see our very own interest rate speculation guide price activity as the RBA reconvene for the first time in 2011.
Although it is clear there is little evidence to suggest we will see interest rates increase in the first half of the year, investors will be eagerly awaiting the RBA's take on the flood disaster in Queensland and the economic impact thereof. Whilst it is true the immense cost the Australian economy will no doubt take a considerable chunk out of the near term growth - as the state of Queensland embarks on a cleanup of epic proportion, supply constraints and the stimulus induced rebuilding process will no doubt put considerable pressure on goods and services which will be the RBA's primary consideration.
Another part to the equation which could act in favour of a longer term reprieve from the RBA is Prime Minister Gillard's tax levy which could be perceived as a potential neutraliser to longer term inflationary pressures. If we should see the RBA signal a neutral stance for an extended period, this will no doubt manifest in Aussie dollar price action. At the time of writing the local unit is buying 99.7 US cents.