US stocks maintained Monday's momentum rallying for the second day as investors found confidence in the latest housing data and better than expected corporate earnings. US Pending Home sales grew 1.0 per cent for the month of December, representing annual growth of 10.9 per cent. Although the result was in-line with estimates, investors were encouraged by the rebound from the previous month, which saw a contraction of 16.4 per cent. This confidence came at the expense of the US dollar, which retreated against major counterparts. The US dollar index which measures the dollar's value relative to six major foreign currencies is currently trading .29 per cent lower at 79.01. This helped key commodities extend gains which saw the price of Gold hit US$1118 a troy ounce - in turn the Aussie dollar regained some composure from yesterdays pummeling on the back of the RBA interest rate decision, which saw the local unit fall to lows of 87.8 US cents. At the time of writing the Aussie dollar is buying 88.7 US cents.
Yesterday, the Aussie dollars winning streak had come to an abrupt end on the unexpected decision the Reserve Bank Board decided to leave the cash rate unchanged at 3.75 per cent. In a statement, Reserve Bank governor Glenn Stevens acknowledged steps taken by Chinese authorities to reduce the degree of stimulus and expects inflation be consistent with the target in 2010. The board's stance was certainly reflective of recent communication which suggested a more flexible approach can be taken at future meetings, but also ensured the door is left open for further adjustments to monetary policy. Governor Stevens also stated the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term.
Local economic feedback today includes Trade balance data for the month of December which is expected to show the deficit widened to 2.36 billion.