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AUD/USD, ASX 200: An inverse play on what happens with US 2-year bond yields
Both the ASX 200 and AUD/USD rallied hard in late 2023 as the Fed introduced financial conditions as a driver of monetary policy in mid-October, paving the way for the FOMC “pivot” towards signalling rate cuts in December. The pre-emptive dovish move – at odds with warnings issued by Fed Chair Jerome Powell previously about declaring victory over inflation too quickly – was perceived by markets as the Fed prioritising growth over inflation, resulting in cyclical assets ripping higher. But now that’s priced. And there remains unease that progress in returning inflation back to the Fed’s target may stall, ... (full story)