Australian dollar takes the red pill
David Llewellyn-Smith | May 26, 2023 09:18
DXY is an unstoppable AI monster. EUR is history:
AUD is in free fall with EUR and CNY:
{68|Gold}} is in all sorts of trouble. OPEC squashed oil:
The commodities crash took a breather. This ain’t over:
Big miners (NYSE:RIO) are bleeding out:
With EM stocks (NYSE:EEM):
And junk (NYSE:HYG):
Get The App
As Treasuries are terminated by AI:
Which keeps inflating stocks”
(NASDAQ:NVDA) earnings triggered another round of AI FOMO. This is real “red pill, blue pill” stuff now as AI shreds asset markets.
The US is the AI capital and is guzzling blue pills like it is going out of fashion. Illusion, denial, mass mania, and fantasy are all in control of stocks.
Conversely, every other market is taking the red pill and facing a harsh reality.
Treasuries are getting slaughtered as stocks rise, pricing out rate cuts and, soon enough, pricing in more hikes given inflation is not defeated.
Chinese and European assets are being burned as the former goes ex-growth and the latter no growth. Credit spreads are blowing out for both.
In FX, EUR and CNY are in free fall as reality bites.
In this environment of a late cycle bubble in AI lifting US activity via wealth effects, as everywhere else swoons on real economy headwinds, I can’t see any reason why DXY should not be back at its former highs, far above.
All that can stop it is a left-tail event:
- the AI bubble collapses upon itself as liquidity dries up;
- the AI bubble collapses as the rising DXY and stalling global economy hammer earnings;
- the AI bubble collapses on an X-date default;
- the AI bubble collapses on the bank run.
Or all four, or some unknown unknown event.
Until then, the red pill path ahead for AUD is to be sucked down a greasy tube into a bottomless, dark reality.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.