In anticipation of today’s U.S. election results, global stocks moved higher, helped by the Australian central bank’s larger than expected interest rate reduction, which may pave the way for European central banks to follow with similar aggressive interest rate cutting action. The Australian central bank slashed the benchmark interest rate by 75 basis points, to 5.25%, which was the lowest in more than 3 years.
The surprise move raised expectations that European central banks as well as the Bank of England would follow suit and aggressively move to lower their respective benchmark interest rates. Later this week, the heads of the European central bank and the Bank of England will meet to discuss the future of their economies.
In early trading, the U.S. Dollar moved lower against a group of other major currencies; it also lost ground against the Yen, trading at 99.05 Yen to the U.S. currency.
Investor eyes are focused squarely on the U.S. election. In a note sent to investors, UBS management commented that a decisive win by the Democratic candidate, Senator Barack Obama, would prove positive for investors’ sentiment, and that any improvement (in investor sentiment) should ultimately benefit the U.S. Dollar, as it would be considered the elimination of a “large uncertainty.”