Australian dollar rides geopolitical relief rally higher

The US dollar sagged Friday night as EUR keeps pumping higher:

That was enough to drive the Australian dollar higher against all DMs:

It was mixed versus EMs:

Gold is still deflating trade war safe haven trades so is missing the DXY input for now:

Oil was calm:

Copper firm:

Miners soft:

And EM stocks:

But junk is flying again:

Treasuries were bid:

The bund curve steepened:

Aussie bonds were hosed:

And stocks were soft:

There wasn’t much data to driven the big DXY drop so let’s just out that down to improving global growth sentiment on the trade non-deals.

That said, there are a few green shoots around for US manufacturing:

Goldman is seeing them globally too:

Much of that lift came from a suspiciously strong Caixin China PMI so I am still skeptical:

That said, if we do get a growth bounce then the whiplash will be nasty and the AUD could catapult higher:

As hopes for MOAR fade:

Yet we were reminded over the weekend of the major headwind in political risk:

Via the BBC:

Boris Johnson has sent a request to the EU for a delay to Brexit – but without his signature.

The request was accompanied by a second letter, signed by Mr Johnson, which says he believes that a delay would be a mistake.

The PM was required by law to ask the EU for an extension to the 31 October deadline after losing a Commons vote.

EU Council President Donald Tusk tweeted that he had received the extension request.

He did not provide details of its content, but added that he will now consult EU leaders “on how to react”.

Hours after losing a crunch vote in a historic Saturday session in the House of Commons, the prime minister ordered a senior diplomat to send an unsigned photocopy of the call by MPs set out in the so-called Benn Act, passed last month.

But so long as the US and China can keep pretending they’ve got a substantial deal cooking it appears the AUD has more geopolitical relief rally ahead.

Houses and Holes

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 fouding 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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Comments

  1. C.M.BurnsMEMBER

    DXY has began to withdraw because the US Fed is now doing not-not-QE, to the time of $60 billion a month; in addition to to specific support for the repo market on top

    • The Traveling Wilbur

      And because markets thought there was going to be actual progress (they thought that on Friday) with Brexit. Didn’t affect USD much, but did basket currencies.