DXY sagged last night and EUR took off:
AUD pinned the ears back:
CNY was up on the day but I would not call it convincing:
Commodities were mildly bid:
Big miners did better:
EM is a bust:
Junk yawn:
Treasury curve was squashed:
Stocks were firm:
US jobless claims lifted that gave the market some bad news to cheer about:
Beyond that, I still can’t see any reason to get excited about any extended AUD rally:
- China’s stimulus is pending but is unlikely to be large.
- Europe is virtually in recession.
- US inflation is not yet beaten. Any Fed pause will trigger asset inflation demanding more tightening.
That said, Alboflation is driving AUD yield spreads wider, most notably at the long end which is now positive again:
But, the same move is also pricing the Australian recession as the curve inverts so how far can that get?
Probably the swing factor for any sustained AUD rally is how substantial is new Chinese stimulus. I don’t expect much but you never know.
