Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

Australian dollar heads to Beijing

Published 24/07/2023, 10:19 am
Updated 09/07/2023, 08:32 pm

DXY firmed towards former support which should now be resistance if the breakdown is real:

DXY

AUD was flogged:

 
AUDUSD

Oil firmed, gold eased:

BRENT

The Crap Complex – dirt, miners Rio (NYSE:RIO), EM (NYSE:EEM) and junk (NYSE:HYG)– are all going absolutely nowhere:

COPPER
RIO
EEM
HYG

Treasury yields eased:

YIELDS

Stocks fell:

SPX

Goldman has a pretty ordinary record on forex but it is making sense at the moment:

USD: Sticking with shallow Dollar depreciation, even after the last hike.

All year, we have argued that the Dollar’s decline from last year’s peak will be shallow and bumpy. Despite the sharper decline after last week’s US CPI report, we are sticking with that view. The benign inflation outlook should keep the Dollar on a depreciation trend as the factors behind last year’s peak can recede further, and cyclical betas should take a leading role. But we think it is another turn on the bumpy path rather than a change in trajectory, for three reasons. First, our US inflation forecast and Fed outlook are somewhat ‘stickier’ than current market pricing for a faster inflation deceleration and a chance of rate cuts early next year. So, we do not think the Fed will be able to pivot as quickly as it often does, even if this is the final hike. We still think the risk of reacceleration will be at least as pertinent as the risk of recession. Second, we have long argued that the global picture is ‘not that divergent’, and this is no different—the US is far from alone on the disinflation journey, and the relative policy outlook could even be modestly Dollar supportive. Third, FX is a relative asset and sharper Dollar depreciation requires better capital return prospects in the ‘challengers’. But, weak Euro area growth and a China policy path heading in the other direction means that is probably still some time away. That said, the non-recessionary rate cuts the market has begun to ponder would undercut a lot of these arguments and are the clearest risk to our ‘shallow’ view. A lot of these considerations should be on display at the FOMC meeting this week. While recent inflation news should be encouraging, the resilience in the economy (and some nascent signs of price surveys bottoming, Exhibit 1) should keep policymakers vigilant and likely to stress that the job is not done. Even if the market takes some relief if Chair Powell signals that future hikes will be subject to upcoming inflation prints, similar to earlier this year, we think markets have already moved a long way in this direction and suspect that the ECB will probably say something similar the following day.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

I will add that the forthcoming Chinese Politburo meeting is crucial. If it surprises either way it will have a material impact upon CNY and EUR.

And, therefore, AUD.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.