ASX 200 rose to 1-1/2 year high in January this year, but since then has been steadily losing height. The retreat contradicts the record highs in the US stocks and the rally in European and Asian majors.
The rally in gold, copper and iron ore continues. Gold rose to highest level since November. This has helped AUD/USD stage a near 600 pip rally from the December low of 0.7160.
AUD/USD breached the short-term downtrend line (drawn from November 9 high and December 14 high) on January 10. Interestingly, the ASX 200 index topped out on January 10 as well. Thus, the strength in the AUD could be blamed for the underperformance of the ASX 200.
The other factor that is being blamed is the losses in the banking shares. Money markets suggest only 15% probability of a RBA rate hike this year. On the other hand, Fed is widely expected to hike rates at least twice this year. Moreover, very low probability of RBA rate hike as compared to Fed rate hike means less incentive to hold Aussie bank stocks (relatively flat Aussie bond yield curve). Consequently, Australian banking stocks have come under pressure.
The index may regain poise if the RBA reiterates dovish view this week, leading to weakness in the Aussie dollar.
You may be interested
Buy Bitcoins in Europe With Bitmoney.euBrian Evans - Aug 10, 2017
Want to purchase bitcoins? Look no further! Buying bitcoins has never been easier, with Bitmoney.eu. Bitmoney.eu makes the process of buying Bitcoin easy and efficient, saving customers…
Goldman Sachs: ‘Real Dollars Are at Work’ in Cryptocurrency MarketsBrian Evans - Aug 10, 2017
Goldman Sachs has published a question-and-answer report focused on cryptocurrencies in which it suggests that clients should be keeping a closer eye on the market. According to…
Bitcoin’s Present Bubble Might Actually be the Beginning of Mainstream AdoptionBrian Evans - Aug 09, 2017
Bitcoin’s enthusiasts are torn between whether to celebrate Bitcoin’s arrival in the foothills of mass adoption, or to lament the upcoming burst that always happens with asset…