In the usual “risk on environment” the commodity related currencies are usually the big winners.
When investors feel that things are generally “safe” money moves from the safe haven’s into higher risk related assets and currencies in commodity related countries such as Australia, New Zealand and Canada.
This is not happening.
In fact (generally speaking) the commods (in particular AUD) are getting more or less hammered, and exhibiting extreme weakness in the face of equity markets still clinging near their highs.
When you see USD cratering as it has over recent days, but in turn see that the Australian Dollar is EVEN WEAKER – you know without question – Houston we have a problem.
With Australia’s economy so tied to its trade with China, there is little doubt that the global macro shift towards “risk aversion” is already very much in play as AUD has been completely obliterated with lots of room for further downside.
I’ve tried on several occasions to “trade a bounce” as we’ve seen surface evidence of “risk on” in equity markets but unfortunately – that’s all it is….. “surface”.
Clearly our friend “risk” is quietly sneaking out the back door.