DXY was firm Friday night. EUR soft:
AUD is on fire:
Commodities yawn:
Big miners (NYSE:RIO) eased:
EM stocks (NYSE:EEM) bouncy:
Junk (NYSE:HYG) yawn:
US curve flattened again:
Stocks eked out a gain:
The AUD is enjoying a mini-me rally repeat from earlier this year when DXY fell materially:
- the Fed was thought to be done as the US economy fell away,
- China was reopening,
- Europe was considered the prime beneficiary, and
- equities were priced for recession.
However, this time around it is different:
- the Fed may pause but it probably still has further to go,
- Chinese stimulus is fighting structural headwinds in property that it cannot overcome,
- Europe is sliding inexorably into recession, and
- equities are priced for a boom.
Thus, I prefer to think of this rally as the fallacious mini-me of the past six months and do not expect the same magnitude of bounce for AUD.
I’ll be using it to reset shorts.