Bonds/Interest Rates

As was expected, domestic inflation put paid to any caution over the global credit situation.

Hardly a shock.

The Dow put on over 100 points as the ever-weakening US dollar sent commodities skyrocketing and there was some buying in the financial sector.

Asia called the Dow down 2% yesterday but got only 0.4% last night in another volatile session.

The RBA is widely expected to raise interest rates by 25 basis points on Wednesday following the Cup.

With the Melbourne Cup next week betters are assessing form guides and economists are doing the same to determine just how high Australian interest rates may go.

The Fed gave the market what it wanted but indicated that will be all for now. Wall Street still loved it. The Dow rose 137. Oil hit US$95. Gold hit US$800.

Oil was the big loser overnight while stock markets began to doubt a Fed cut tonight.

There is a wealth of US economic data being released this week but it will all be overshadowed by one number – that of the Fed funds rate after Wednesday night.

It looked like Japan was about to drag itself out of a decade of deflation, but no more. The Aussie gets a green light.