David Llewellyn-Smith | Sep 06, 2021 09:58
Forex markets sustained their counter-trend actions Friday night, and how. DXY fell like a stone while EUR and AUD are roaring:
It’s a pretty wild rally suggesting a short squeeze yet CFTC data got even longer:
Commodities all rose:
Miners less:
EMs stocks too:
EM junk was soft:
The US curve steepened:
And Growth led stocks again:
So, how far is this rally going to get? The drivers are threefold:
Of these three I expect:
In terms of forex then:
It’s not exactly roses for the AUD so I’d still be looking to use any strength to shift assets offshore, especially so given the longer-term outlook remains DXY outperformance on fiscal, growth and yield leadership.
The major upside risks is a policy error from the RBA and earlier stimulus from China. Of those, the first is more worrying right now.
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