Richard Franulovich, head of FX strategy at Westpac, suggests that while global markets seem to hang on every twist and turn in global trade developments they have if anything been decoupling lately.

Key Quotes

“Global markets were tightly correlated between Aug-Oct 2019, trading mostly around the ebb and flow in US-China trade hostilities. But since then there has been a notable shift; at one end of the spectrum US equity and credit markets forged ahead solidly while AUD and US fixed income yields have been “stuck” at much lower levels.”

“In AUD’s case the RBA’s ongoing easing bias and a growing recognition that unconventional easing is a serious policy option for 2020 is likely a key factor holding it back. Commentators have noted that at least some of the RBA’s ongoing easing bias is motivated by a desire to cap AUD upside.”

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