DXY rebounded.
AUD went into hard reverse.
Leda boots are OK.
Oil and old muted.
Metals no bueno for growth.
Miners meh.
EM meh.
Junk better.
Yields eased.
Stocks out of uff.
On a day when the US and China agree to trade talks and China launches another round of yawnulus, a falling AUD is not a very good sign for global growth prospects.
Partly, it is because global growth expectations are in free fall from PMIs.
And partly it is a Fed in free fall.
If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment.
The effects on inflation could be short lived, reflecting a one time shift in the price level. But it’s “also possible that the inflationary effects could instead be more persistent.
It’s not much fun for risk when growth prospects are in free-fall and the world’s central bank is simultaneously cornered.
In a world built on the Fed “put”, equities did well not to crash.
AUD is probably still biased upwards, but if the bad growth/bad Fed gets traction, a violent reversal will be in order.
