The above graph plots the following:
1) The average Australian government bond yield less the average US government bond yield in orange
2) The AUDUSD currency pair in white
What is the graph telling us now? It signifies a major divergence. Basically the yield differential has been falling even though today we did not see a cut in Australian rates as many expected.
Either rates are going to rise rapidly in coming months (unlikely) or the AUD will fall hard. I would expect the latter. RISK OFF is approaching!
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