# WTF RBA rate cut



## Naked shorts (2 December 2008)

So we had a rate cut today, down 100BP, more then the expected 75-50BP cut.
http://www.abc.net.au/news/stories/2008/12/02/2435606.htm?section=justin

It is common knowledge that when interest rates go down, so does the value of the currency. I decided to trade this news....

Instead of AUD tanking (like it should when interest rates are cut more then expected), it shot up. See attached pic


I wanted to know why it acted like this? I'm obviously missing something


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## Nick Radge (2 December 2008)

NS,
The media and mainstream economists were expecting 75bp. The IR futures markets had priced in 125bp, so the 100bp is actually less than what the _*market*_ thought, hence the rally in the AUD.


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## Naked shorts (2 December 2008)

Nick Radge said:


> NS,
> The media and mainstream economists were expecting 75bp. The IR futures markets had priced in 125bp, so the 100bp is actually less than what the _*market*_ thought, hence the rally in the AUD.




Where can i find out everything related to IR futures?


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## cuttlefish (2 December 2008)

Nick Radge said:
			
		

> is actually less than what the market thought, hence the rally in the AUD.




And the post announcement fall in XFJ


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## Nick Radge (2 December 2008)

http://www.sfe.com.au/content/prices/rtp15sfIB.html


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## Naked shorts (2 December 2008)

Nick Radge said:


> http://www.sfe.com.au/content/prices/rtp15sfIB.html




How do you get a 125BP cut from that table?


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## white_goodman (2 December 2008)

hmm looks like the aud was a big earner for me today, cant wait till i get home. Maby thats why they say dont trade the news, its so rapid and soemtimes you can get burnt


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## Trembling Hand (2 December 2008)

If you are going to trade the news why would you trade what is expected. Where's ya edge in THAT!!!!!!!!


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## Naked shorts (2 December 2008)

Trembling Hand said:


> If you are going to trade the news why would you trade what is expected. Where's ya edge in THAT!!!!!!!!




It was expected on all my sources (bloomberg, ABC, SFE, RBA) that the rate cut would be 75-50BP. It was my personal opinion that it would be more then that. So i waited for the news to come and I was right.

Of course you don't make money if the release is what is expected.


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## nomore4s (2 December 2008)

Naked shorts said:


> It was expected on all my sources (bloomberg, ABC, SFE, RBA) that the rate cut would be 75-50BP. It was my personal opinion that it would be more then that. So i waited for the news to come and I was right.
> 
> Of course you don't make money if the release is what is expected.




lol, you obviously weren't the only one who was expecting a bigger cut.


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## RodH (2 December 2008)

Naked shorts said:


> It was expected on all my sources (bloomberg, ABC, SFE, RBA) that the rate cut would be 75-50BP. It was my personal opinion that it would be more then that. So i waited for the news to come and I was right.
> 
> Of course you don't make money if the release is what is expected.




most of my rss feeds said 100, though forex factory said expected was 75.. I thought there might be a chance of a dip, but given the amount of times 100 came up I figured it was too risky of a trade.

just bad luck really, brush yourself off and look for the next trade


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## Naked shorts (2 December 2008)

RodH said:


> most of my rss feeds said 100, though forex factory said expected was 75.. I thought there might be a chance of a dip, but given the amount of times 100 came up I figured it was too risky of a trade.
> 
> just bad luck really, brush yourself off and look for the next trade




Yeah forex factory was another one of my sources. 
Even senior interest rate strategist at JP Morgan Aus thought the cut might be only 50BP.

http://www.bloomberg.com/avp/avp.ht...//media2.bloomberg.com/cache/v5Q3KAa7uHBc.asf

Its no wonder they get news like this
http://online.wsj.com/article/SB122818726575871543.html?mod=rss_markets_main


Can I ask you who you are getting your RSS feed from?


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## julius (2 December 2008)

The carry trade type play you are referring to has gone to sh*t in the past 12 months.

I really wouldn't be reading much into anything fundamental these days.


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## MRC & Co (2 December 2008)

Yeh, Reuters and a lot of news sources were expecting 75 I believe, but consensus seemed to be around 100.  

My plan personally (on the SPI) was to sell 75 or below, buy 125 and above and buy 100 followed by a quick cut and reverse, which is exactly what I did, and exactly what happened.  Still lost, such is the game of trading.


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## RodH (2 December 2008)

Naked shorts said:


> Yeah forex factory was another one of my sources.
> Even senior interest rate strategist at JP Morgan Aus thought the cut might be only 50BP.
> 
> http://www.bloomberg.com/avp/avp.ht...//media2.bloomberg.com/cache/v5Q3KAa7uHBc.asf
> ...




I'm fairly new to the game so not sure if these are the best sources but in my reader the main ones are:
http://www.smartcompany.com.au 
http://www.sharecafe.com.au/
http://www.compareshares.com.au/


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## Macquack (2 December 2008)

Naked shorts said:


> So we had a rate cut today, down 100BP, more then the expected 75-50BP cut.
> http://www.abc.net.au/news/stories/2008/12/02/2435606.htm?section=justin
> 
> It is common knowledge that when interest rates go down, so does the value of the currency. I decided to trade this news....
> ...




Did the Reserve Bank intervene by buying Australian dollars to cushion the drop?


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## skyQuake (2 December 2008)

IR futs had it fully factored in. Comments from glen stevens didnt hurt either.


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## Naked shorts (2 December 2008)

Macquack said:


> Did the Reserve Bank intervene by buying Australian dollars to cushion the drop?




It didnt drop, thats the thing. otherwise i would have a few fast woman sitting on my lap right now.

It only droped about half an hour after i covered my short. see below

And to the best of my knowledge, RBA didnt intervene. I think they did it a couple of month back and they got nothing but flack


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## drsmith (2 December 2008)

Nick Radge said:


> http://www.sfe.com.au/content/prices/rtp15sfIB.html



It will be interesting to see if the RBA reaches 3% (or beyond) by March/April 2009 as implied by the settlement prices.


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## Aussiejeff (2 December 2008)

drsmith said:


> It will be interesting to see if the RBA reaches 3% (or beyond) by March/April 2009 as implied by the settlement prices.




It will be interesting to see what the RBA says/does when the interest rate hits 1% by mid next year and the economy is still $hite.


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## Gundini (2 December 2008)

Aussiejeff said:


> It will be interesting to see what the RBA says/does when the interest rate hits 1% by mid next year and the economy is still $hite.




No chance at all... This is scaremungering at it's best....Sorry to say Puffy...


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## drsmith (2 December 2008)

I'll have an extended supply of baked beans and a breadmaker if that comes to pass.


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## alphaman (2 December 2008)

Aussiejeff said:


> It will be interesting to see what the RBA says/does when the interest rate hits 1% by mid next year and the economy is still $hite.



Probably the same old "Australian economy is doing OK". I never find RBA comments interesting.


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## Nyden (2 December 2008)

Gundini said:


> No chance at all... This is scaremungering at it's best....Sorry to say Puffy...




Rates in the US aren't far off of that; and look at them. Don't say we're different 

Never say never, is all.


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## Naked shorts (2 December 2008)

DONT WORRY so much guys, we can always just print money till the trees run out.


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## Naked shorts (2 December 2008)

Gundini said:


> No chance at all... This is scaremungering at it's best....Sorry to say Puffy...




Thats what everyone was saying about the bears before we tanked...


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## tayser (3 December 2008)

This is why I'll never gamble with newstrading 

Wait for the initial move to do its thing, then take a few pips at high lots on the retrace, much easier and probability is no longer 50/50 like it is when you take a position before an announcement.


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## Naked shorts (4 December 2008)

Naked shorts said:


> How do you get a 125BP cut from that table?




Any ideas Nick?

@Taser
Some people call that getting the retrace, some call it catching knifes. In my experience doing what you have suggested is more risky then trading the news. Sure you can normally make a few pips when people close out, but there is normally no telling if it will shoot higher or tank back to normal (or vice versa).

I do enjoy 30pips more then I enjoy 3pips.


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## >Apocalypto< (4 December 2008)

tayser said:


> This is why I'll never gamble with newstrading
> 
> Wait for the initial move to do its thing, then take a few pips at high lots on the retrace, much easier and probability is no longer 50/50 like it is when you take a position before an announcement.




every trade is a 50/50 Tayser no matter how good your edge may be.


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## >Apocalypto< (4 December 2008)

Naked shorts said:


> Any ideas Nick?
> 
> @Taser
> Some people call that getting the retrace, some call it catching knifes. In my experience doing what you have suggested is more risky then trading the news. Sure you can normally make a few pips when people close out, but there is normally no telling if it will shoot higher or tank back to normal (or vice versa).
> ...




you have to remember Tayser is a scalper NakedS he may only want 3 - 9 pips on the trade.


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## MRC & Co (4 December 2008)

>Apocalypto< said:


> every trade is a 50/50 Tayser no matter how good your edge may be.




I wouldn't say that.  Those who can read the flow end up with pretty solid probabilities.  Freaks.

Being the first on totally unexpected news (like the IR cut 2 months ago), is practically free money.


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## Aussiejeff (5 December 2008)

Following the UK and Eurozone IR slashing last night, the Big Q is "will the RBA cut again before Xmas?"

It's a race to ZERO, folks!

What say you, Santa? :santa:


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## Nick Radge (5 December 2008)

> "will the RBA cut again before Xmas?"




You can see the IR futures have priced in 30bp before end of Dec, but look at Feb, down to 3.5% and 3.0% in April 2009.


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## >Apocalypto< (5 December 2008)

MRC & Co said:


> I wouldn't say that.  Those who can read the flow end up with pretty solid probabilities.  Freaks.
> 
> Being the first on totally unexpected news (like the IR cut 2 months ago), is practically free money.




I disagree here MRC as you can't make a trade no matter what even a arbi and tell me with 100% certinty that it will be a win no matter what. 

If that was the case then trading would be easy and no one would work. I also had the opinion that you could have sure things but after reading trading from the zone I understood that there is no sure thing in the market no matter how good it looks.

IMO.


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## IFocus (5 December 2008)

Nick Radge said:


> You can see the IR futures have priced in 30bp before end of Dec, but look at Feb, down to 3.5% and 3.0% in April 2009.




I take it at those levels its pointing to a crunch in the economy, negative growth.


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## Aussiejeff (5 December 2008)

IFocus said:


> I take it at those levels its pointing to a crunch in the economy, negative growth.




With the news out of China justs getting worse (almost by the day it seems), how can we possibly hope to rebound? ATM there is only one clear direction. Down. Rapidly falling IR's are a reflection of that sentiment.


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## doogie_goes_off (5 December 2008)

Aussiejeff said:


> Following the UK and Eurozone IR slashing last night, the Big Q is "will the RBA cut again before Xmas?"




FYI the RBA does not meet again until the first tues in Feb as far as I can tell.

So the short answer is NO.


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## MRC & Co (5 December 2008)

>Apocalypto< said:


> I disagree here MRC as you can't make a trade no matter what even a arbi and tell me with 100% certinty that it will be a win no matter what.
> 
> If that was the case then trading would be easy and no one would work. I also had the opinion that you could have sure things but after reading trading from the zone I understood that there is no sure thing in the market no matter how good it looks.
> 
> IMO.




Yeh, not 100% sure, of course.

But probabilities for some traders can be higher than 50/50 for sure.

Some do find trading easy, surprisingly.


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## Aussiejeff (5 December 2008)

doogie_goes_off said:


> FYI the RBA does not meet again until the first tues in Feb as far as I can tell.
> 
> So the short answer is NO.




I'm not so sure about the negative. 

I suspect if the economy tanks in the interim an "extraordinary meeting" may be held by the RBA to slash rates again. 

Shirley, the GuvMint and the RBA aren't going to be hawg-tied by an inflexible "set holiday" period during a time of Great Need!!


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