AUD: Headwinds stiffen for Australia - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that we are at an interesting juncture where higher US yields may contribute to stronger USA investor confidence but on the other hand, higher-yielding countries that have experienced a rise to record and dangerous levels of household debt, Australia and New Zealand, have economies that are threatened by higher interest rates. 

Key Quotes

“US economic data is showing more strength supporting the case for higher rates in the USA.  Australian capital expenditure and building approvals data suggest the economy is stalling.  While the USA appears to be moving forward with infrastructure spending, the Australian government feels hamstrung by threats of a rating down-grade.  We have noted that a rising yield environment is a threat to high yield currencies, like the AUD and NZD that out-performed earlier in the year as yields fell to record lows.  We see risk building for more significant falls in AUD and NZD.”