Regime change for the USD; AUD breaks down
It is easy to be cynical about newfound USD bullish sentiment, where suddenly yields and rates matter for currencies. However, rates and yields have more often played a dominant role in currency markets. Now that the equity market has become more volatile and confidence in the global economy has ebbed, we may see the USD continue to reconnect to its interest rate and yield differentials. In more automated and index driven markets, we may see a surprisingly rapid rebound in the USD with limited retracement. Political uncertainty has weighed on the USD over the last year, but Trump has gained traction with tax reform, trade policy, progress in Korea, and can claim credit for stronger economic momentum. A more assertive policy towards Syria and Iran may help improve Trump’s approval at home while increasing geopolitical uncertainty. It is too early for the market to be fretting about twin deficits. It needs to wait until there is a clearer picture of how Trump’s policies influence potential output, and the peak in US rates and yields are in sight. AUD/USD has broken key support and maybe reconnecting to its now negative yield spread across its entire yield curve. It faces headwinds from protectionist trade policies, tightening Chinese financial sector oversight, a weaker housing market, rising bank funding costs, pressure on its financial sector from a Royal Commission into its misconduct, and political uncertainty.
Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is licensed in Australia to provide financial services.
We produce macroeconomic analysis of topical themes in global financial markets, with a particular focus on foreign exchange.
These reports are drawn from analysis by Greg Gibbs and inform the capital management he undertakes on behalf of the company.
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Greg Gibbs is the director and founder of Amplifying Global FX Capital. Greg began his career at the Reserve Bank of Australia in 1989, and in the early 1990s, he was the first economics graduate at the Bank to be assigned to the foreign exchange dealing desk. In 1996, Greg joined Bankers Trust Australia on the FX sales desk covering Australian and international fund managers. In 1999, he joined Westpac Bank in New York and switched to the research side to become the bank’s first FX strategist based in New York, carving out a role covering major currencies. In 2002, he returned to Australia as senior FX strategist at RBC covering APAC currencies, and in 2006 he moved to ABN AMRO in Sydney, reuniting with many of his colleagues from Bankers Trust that were again part of a thriving full-service investment bank. Greg continued to work on at RBS in Sydney as senior FX strategist after it took over ABN AMRO in 2008. He moved to Singapore in July 2012 after the bank consolidated its FX business in Asia, and was appointed Head of APAC Markets Strategy for the bank in February 2014. In early 2015, Greg began to work on establishing his own company, Amplifying Global FX Capital, and launched its website in August 2015 after completing duties at RBS.
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