DXY rebounded:
AUD fell:
Whole crap complex fell. CNY:
Oil and gold:
Dirt:
Miners:
EM:
Junk:
Yields bounced:
Stocks down:
Credit Agricole was some thoughts:
Goldilocks trading conditions buoyed investor sentiment in Asia. US GDP growth surprised to the upside but still showed slowing consumer spending growth. The Fed’s Beige Book pointed to slowing growth as well as falling discretionary spending by consumers. FOMCvoting hawk Loretta Mester continued the tempering of hawkish rhetoric saying she favoured remaining on hold in December and that the Fed is in a good place to assess whether inflation is on a path back to 2%. Downside surprises in China’s PMI data were not enough to dampen sentiment as investors continue to price in a soft economic landing in the US. A majority of Asian bourses as well as S&P500 futures were trading higher at thetime of writing. Lower UST yields left the USD on the back foot except against the EUR and the GBP. The Antipodean currencies, especially the AUD, were the outperformers during the Asian session.
USD: core weakness
The USD underperformance continues as US rates and yields remain under downside pressure. More recently, month-end rebalancing flows have likely added to the headwinds for the currency. The subsiding US inflation has become a core weakness for the USD as it fuels market expectations of a dovish Fed pivot in 2024. That being said, we think that the markets have gone well ahead of themselves pricing in Fed rate cuts. We expect the FOMC to disappoint the dovish market expectations in part because we think that the recent disinflation trend would slowdown in the coming months. This could help the USD to consolidate at the start of 2024.
I expect further DXY weakness as US economic weakness spreads over the next few months.
That should lift the AUD further yet,
