Central bank activity was especially hectic last week for most of the major currencies, with no fewer than five major central banks out of six announcing monetary policy decisions.

In particular, last week's central bank action included the RBA's Rate Decision on Tuesday, the FOMC's Rate Decision on Wednesday and the BOE, ECB and BOJ's Rate Decisions on Thursday.

RBA Surprises Market With 25 bps Cash Rate Hike

Last Tuesday saw the RBA Rate Decision again take the market by surprise for the second consecutive month. In it, the Australian central bank unexpectedly raised its benchmark Cash Rate by 25 bps to 4.75 percent from 4.50 percent.

The move came just one month after the RBA unexpectedly left rates unchanged in their September meeting after the majority consensus among economists and market observers was for a 25 bps rate hike.

The latest RBA rate hike, combined with the next day's U.S. Fed quantitative easing announcement, were enough to propel the Australian Dollar through the all important parity level on Wednesday. This took the Aussie to a new post 1983 float high of 1.0182 during last Friday's session.

AUDUSD was additionally supported by strong commodity prices, with the price of gold also making a new all time high of $1,398.13 per ounce on Friday. Furthermore, the price of crude oil increased by 6.66% last week.

Fed Reveals QEII, Leaves Fed Funds Rate Unchanged after Tuesday's Elections

The second major rate decision last week was made by the U.S. Federal Reserve on Wednesday.

The Fed's announcements followed Tuesday's mid term Congressional elections, which split the legislative branch of government as the Republican Party won an estimated majority of 239 seats compare with just 188 seats for the Democrats in the House of Representatives. Nevertheless, the Democrats continued maintaining their majority in the Senate by an estimated 51 seats to 46.

On Wednesday of last week, the Fed then announced it would keep the Fed Funds rate at ‹0.25%, thereby keeping its promise to hold rates at low levels for an "extended period".

Along with its Rate Decision, the associated FOMC Rate Statement outlined the new stimulus measures - dubbed QE II by the market - that the Fed was going to undertake to provide additional stimulus and support for the U.S. economy.

The QE II stimulus package announced by the Fed would consist of a $600B buyback of U.S. Treasury securities by the end of 2011. This amount of quantitative easing was short of the consensus of $500B over six months the market was expecting.

Nevertheless, the market was concerned about the tentative plans the Fed has to purchase Mortgage Backed Securities that would make the total amount for the QE II plan approximately $880B reinvested in U.S. securities through June of 2011.

The fresh easing measures were not taken favorably by the market and the Greenback declined sharply throughout the rest of the week as a result, especially against the Australian and New Zealand Dollars.

Nevertheless, the Greenback managed to rise against the Japanese Yen on the week, perhaps since that currency also offers minimal interest rates to investors.

BOE Keeps Official Bank Rate and Asset Purchase Facility Steady

On November 4^th, the Bank of England announced it would keep the benchmark Official Bank Rate at 0.50 percent and the Asset Purchase Facility at 200B, as was widely expected.

The Pound Sterling subsequently hit a new nine month high last week against the Greenback, in part as a combined result of the U.S. Fed and the BOE's decisions.

The BOE's Rate Decision came on the heels of a favorable U.K. Manufacturing PMI number, which came out at 54.9 versus a consensus of a 53.2 print. Also helpful was U.K. Services PMI which printed at 53.2 versus an expected number of 52.4.

The market seemed to infer that the stronger than expected numbers for the third quarter made the central bank less likely to increase stimulus measures and instead keep rates at their present low levels without increasing the Asset Purchase Program.

The market will now look to the November 3-4^th meeting's minutes to be released on November 17^th to get a better picture of the BOE's future monetary policies.

ECB and BOJ also Leave Rates Unchanged

The European Central Bank also kept its benchmark Minimum Bid Rate unchanged at 1.0 percent last week.

Furthermore, ECB President, Jean Claude Trichet in his post rate announcement statement wrote that,

"the EU Heads of State and Government agreed on the reform of the European Union's economic governance."

He added that,

"The proposals put forward by President Van Rompuy represent a strengthening of the existing framework for fiscal and macroeconomic surveillance in the European Union. However, the Governing Council considers that they do not go as far as the quantum leap in the economic governance of Monetary Union that it has been calling for."

The ECB's rate announcement, along with the U.S. Fed's announcement on Wednesday helped push the Euro to its weekly high 1.4281 on Thursday, with the Euro gaining a net +0.8 percent against the Greenback for the week.

Also out last Thursday, was the Bank of Japan's release of their Minutes from the October monetary policy meeting where it was decided to reduce the Overnight Call Rate from 0.1% to a range of 0.0% - 0.1%.

Furthermore, the meeting minutes showed the concern of several policymakers that,

"if interest rates declined to an excessive degree, the negative effects of that decline would be larger than monetary easing effects, since the financial intermediary function would be impaired by the lower returns of financial institutions and investors."

The Japanese central bank also announced they would be expanding its Japanese asset purchase program to include ETFs and REITs.

USDJPY had previously made a new 15 year low of 80.24 on Monday before trading higher despite Dollar weakness elsewhere. The pair ended the week with a net +1.2% gain.

Coming Up Next Week: BOJ, RBNZ, BOE and ECB Issue Reports

Next week's central bank calendar contains no major central bank interest rate decisions or monetary policy meeting minutes to be released.

Nevertheless, Monday will see the BOJ issue its monthly report, while on Wednesday, the RBNZ will release its Financial Stability Report, and the BOE will put out Inflation Report.

On Thursday, the ECB is scheduled to release its Monthly Bulletin, thus completing next weeks' central bank activities, other than finance officials attending the G-20 Meetings on Thursday and Friday in Seoul.