[DanRath]

Despite poor retail sales figures out of the US, equity and commodities markets closed higher. After the RBA Statement and the subsequent Minutes of last week, it seemed unlikely that much would come from RBA Governor Stevens’ testimony to Parliament this morning. Indeed his opening statement was of little interest, but the Q&A session had a much more hawkish tone to it than last weeks’ communications. Current policy is ‘an emergency setting’; they ‘will tighten once the emergency has passed’, and ‘normal policy is a good deal north of where we are now.’ AUDUSD ran up to new highs for the year. The market turned around however on news that China has placed a three year ban on further expansion of steelmaking capability; and with Shanghai stocks also off over 2.5%, AUDUSD gave up all of the gains for the day. There is good support at 0.8000 and at 79.80 in AUDJPY, but a further fall in Shanghai shares - now at key trendline support – could see a more significant reversal in AUD.