Central black magic leaves RBA in a jam
A few waves of the dovish wand from Ms Yellen and some increasingly negative interest rates in Europe during March and just like that, markets are saved again. It is hard to deny the power of Central Bankers acting collectively. We are without doubt in a POLICY driven environment that can trump fundamentals in the short term. .......As much as these favourable policy developments are healthy for risk markets, they are unhealthy for Australia via the immense pressure they place on the AUD currency. A weakening USD via Ms Yellen only adds more fuel to the currency fire. We believe the AUD will continue to rally until the RBA resume cutting interest rates (as early as May – although this may not halt its ascent much but will help slow things down). Structural demand for AUD assets remains from international investors who remains buyers of AUD currency to settle Australian bond purchases.
Technically, the AUD trades very well with broadly higher price highs, and higher lows, since mid Jan. Pricing pullbacks have been shallow and position remains short. Note the golden cross of 50 day and 200 day moving averages points to continued performance. We have been hugely constructive on the currency (title of our Feb monthly available on website) since Japan went to negative rates and remain constructive to 80 cents and beyond until the RBA resumes cutting
Read more in the Jamieson Coote Bonds March monthly
[JCBAF Market Update March 2016..pdf]
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Angus established Jamieson Coote Bonds with Charlie Jamieson in 2014. He started his career with JPMorgan in London, before working at ANZ and Westpac, where he transacted the first ever Australian Bond trades for several large Asian Central Banks.
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