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Iron ore is the cause as markets observe he obvious, that Australian rebalancing is in trouble, but the effect is a shift in interest expectations in bond markets and now a falling Aussie.
The 10 year bond spread between Australia and the US has fallen 20bps in the last month to 97 points and is threatening to break lower as local bonds are bid more heavily than in the US:
The Credit Suisse interest rate market is still only pricing 6bps of rate cuts today but that, combined with the above, is enough to have the Aussie dropping into the 85s this morning:
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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