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Geopolitical mess

Published March 25, 2019

Good Morning,

Am just back from a weeks’ leave and the AUDUSD is at the same level as last Monday morning, most cross rates are the same, but the clue is AUDJPY being 100 points lower- thus an element of risk-off is back.  News reports this morning that the Russians have just landed some troops in Venezuela have somewhat offset Trump being ‘cleared’ in the Mueller investigation, thus this morning and the week ahead may shape up to be rather geopolitical.

Further flaming may be drawn from Italy on Saturday becoming the first European Union and G7 country to join China’s Belt and Road Initiative (aka the new silk road), which has drawn concern from their U.S. and European allies.  Germany is forging its own path as it steamrolls towards a state-owned fund to block unwanted takeovers by Chinese and other foreign firms, with a government source telling Reuters “Germany was too reluctant to define its national interests. This is changing now”. In the UK, Brexit is Brexit – if I was Theresa I’d be off on a holiday now and leave the rabble to deal with it and look for a possible new UK leader. So in the wash-up, it seems that no-one seems too keen on globalization talk anymore…

Locally no major data this week but the RBNZ meets on Wednesday and their thoughts will be widely anticipated.  Keep an eye on the yield spread between Australia and the USA as it widens again and pressures the AUD downwards towards exporter demand at 0.7000 (chart below)

AUD blue line: Yield Spread between USA and AU red line.