Australian dollar licks its wounds

DXY is holding for now.

AUD is licking its wounds.

Lead boots bounced.

Gold is firm, oil not.

Metals are lacklustre.

Mining bear intact.

EM bounced.

Junk toppy.

Yields held the losses.

Stocks fell anyway.

I expect more AUD chaos for now. The market remains very short DXY, and such consensus trades often need long digestion periods before they can deliver. If they do at all.

For me, the base case is US stagflation over the next 6-12 months, so the Fed may be slower than the market hopes, which will support a contrarian and sticky DXY.

In that event, we can expect further wailing from the Child President as an offset, so chaos is still my base case for the AUD.

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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.