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Australian dollar trembles at Fed’s approach

Published 31/01/2023, 10:55 am
Updated 09/07/2023, 08:32 pm

DXY finally rebounded as EUR fell:

 
DXY

That triggered reversals across all markets. AUD down:

AUDUSD

Commods down:

BRENT
COPPER

Miners (NYSE:RIO) down:

RIO

EM stocks (NYSE:EEM) down:

EEM

Junk (NYSE:HYG) down:

HYG

US yields up:

YIELDS

Stocks down:

US500

The approach of the Fed put the jitters through markets. It will probably remain hawkish despite likely reducing its hiking pace to prevent an over-loosening of financial conditions.

However, inflation is cooling fast. CorePCE has faded to 0.3% per month:

INFLATION

Though Core Services are still sticky:

COREPCE

As wage growth is still strong but is also cooling fast:

AVERAGEHOURLYEARNINGS

The market has already rallied on these numbers What will matter for the Fed is how it frames the terminal rate and any easing ahead.

I doubt the dot plot will be dovish yet so that may support a return to AUD weakness.

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