As a major leg of many carry trades, the collapse of the Aussie Dollar in the last week has sent ripples through many risk-on positions. Following last week's plunge in inflation to record lows, one would have assumed that expectations for a 'stimulating' rate-cut were baked in to some extent (as AUD plunged then), but this morning's surprise RBA move has sparked another leg down in the commodity currency, breaking below a crucial uptrend off the January lows as the commodity currency decouples from exuberance in Chinese metals...
Just last week this happened... record low inflation
Which triggered this...
- *RBA MAY RATE CUT ODDS RISE TO 40% FROM 14% YDAY, FUTURES SHOW
“A pre-emptive May cut is surely now a real possibility,” said Gareth
Berry, a foreign-exchange and rates strategist in Singapore at
Macquarie Bank Ltd. “At the latest, an August cut is now
inevitable. That spells the end of this three-month old Australian
dollar rebound, and the downtrend can now resume in earnest.”
But apparently that was not priced in...
Breaking AUD below a key uptrend...