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Australian dollar pops and drops as Fed hawks up

au.investing.com/analysis/australian-dollar-pops-and-drops-as-fed-hawks-up-200578902
Australian dollar pops and drops as Fed hawks up
By David Llewellyn-Smith   |  Sep 21, 2023 09:05
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DXY looks like it wants to break out:

DXY
DXY

AUF popped and dropped but is still grinding higher overall:

AUDUSD
AUDUSD

CNY is mired:

CNYUSD
CNYUSD

Oil finally took a breather as the machines ran out of puff:

BRENT
BRENT

Dirt is worthless:

COPPER
COPPER

Miners have stalled:

RIO
RIO

EM stocks look like they might retest lows:

EEM
EEM

Junk is in no man’s land:

HYG
HYG

The curve steepened as yields backed-up:

YIELDS
YIELDS

Stocks were flogged:

SPX
SPX

The Fed did deliver a hawkish surprise. Growth and inflation forecasts were lifted, and the projected Fed funds rate:

PROJECTIONS
PROJECTIONS

The 2024 expected rate path lost one and a half rate cuts, and 2025, up to four cuts.

This is such a strong re-evaluation of the rate path that it rather looks like the Fed recalibrating its assessment of r*.

No wonder stocks didn’t like it, and DXY did. This hints at a higher structural shift higher in the US neutral interest rate. Stocks are NOT priced for that.

With the rest of the world now paused or cutting, DXY has a free hand to run.

AUD is still very oversold, and the Chinese recovery fantasy is helping it for now. But this boosts the DXY bull market case so the headwinds are not going away anytime soon.

Australian dollar pops and drops as Fed hawks up
 

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Australian dollar pops and drops as Fed hawks up

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