Wall Street vaulted to new records last week after US Federal Reserve Chairman Ben Bernanke pledged to maintain the Fed's “easy-money” policy for the foreseeable future. Speaking in Boston, Dr Bernanke promised to keep interest rates low due to the weak economy, suggesting a slower timeframe to the proposed tapering of the Fed's aggressive bond-buying program. His comments surprised markets, which have been bracing for the Federal Reserve to scale back the bond-buying program as soon as September. As a result, equities rallied while bond yields and the US Dollar fell.
Locally, following poor business data and a spike in the unemployment rate, financial markets have increased the probability of another rate cut by the Reserve Bank of Australia (RBA) at their August Board meeting, with markets now factoring in a 60% chance. This is still data-dependant with analysts focused on the June quarter Inflation data out next Wednesday.