The abrupt turnaround in the AUD on Thursday may be indicative of a more erratic FX market this year. But it may also reflect two big risks that continue to lurk in the background – increasing financial risk in China and financial stress emanating from the apartment sector in Australia. The Australian employment data were […]
RBA governor Lowe is a month into his new job and has already signed off a new policy targets agreement, fronted parliament, chaired his first policy meeting, released a financial stability report and given his first public speech with Q&A. He has emphasized a flexible approach to policy suggesting he is willing to live with […]
Looking over the map, recent USD gains are less about renewed strength in the US economy and more about weaker trends in JPY, GBP and EUR spilling over to several emerging markets through direct links to their currencies or via currency basket regimes. Commodity currencies and some emerging market currencies that are less influenced by […]
Australian commodity prices continue to rise with further gains in coal and iron ore prices this week, despite news that the Chinese government is moving to contain credit growth and its housing market. The medium-term outlook remains unclear, but taking commodity price moves at face value suggests the AUD should perform relatively well. Rising global […]
Brexit fear is now close to being fully priced into the GBP, in our view. The most recent slide in October tends to reflect the hard Brexit risk. GBP is likely to remain weak for some time, but it may have seen its low in the flash crash last week. Global bond yields continue their […]
Relative commodity price trends (stronger energy and weaker dairy) help account for some of the recent recovery in the AUD/NZD. Further supporting the recovery is the rise in global bond yields, tending to remove some of the additional demand for NZD generated by a global investor pre-occupation in a ‘search for yield’. There may be […]
GBP has finally and belatedly responded to the heightened and prolonged Brexit uncertainty, notwithstanding a resilient UK economy and prospects of significant UK fiscal stimulus. The outlook remains negative, but it is risky to jump on the selling bandwagon. Bond yields may have resumed a fledgling rising trend, supported by the BoJ’s ‘Yield Curve Control’ […]
News related to Deutsche Bank turned around what was a developing risk positive trend in global markets and currencies this week. A stronger oil price helped weaken the JPY and strengthen energy producers, more broadly boosting risk appetite. We are not convinced problems at Deutsche bank will have a sustained negative impact on global markets, […]
FX markets are still searching for clear direction. We have seen some evidence of a return to demand for higher yielding EM and commodity currencies in a risk constrained environment. Lower global yields and some evidence of economic stability or strength in selected EM and commodity producers are attracting capital to these currencies. The JPY […]
Currency markets have been mixed, choppy and in most cases exhibiting no trend over recent months. There are few clear opportunities and a number of risks to consider. Two key data points this week in the USA include PCE inflation and durable goods orders. The Fed has forecast a subdued outlook for inflation, but it […]