The action of the Reserve Bank of Australia today in raising interest rates 25 basis points was a milestone event in world markets this year because it was the first G20 member country to increase rates. This is the “inflection point” with respect to global interest rates. We think that gradually, and quicker than expected, central banks will start to increase interest rates hereon. Perhaps at last we might see the long dated US Treasuries fall and commodities advance! However, before this happens we probably need confirmation of a breakout in the Aussie Yen (above 80). As far as currency markets go we are on a knife edge/tipping point. In order for the next leg up in “risk taking” or “yield seeking” we need to see high yield (or commodity) currencies break to new highs against the Yen which has been the pivot point of the so called carry trade.
Aussie Dollar Yen Spot
Norwegian Kroner Yen Spot
We are confident that the Aussie Yen and Norwegian Kroner will breakout against the Yen. Once one breaks the other will very likely follow and so too will Oil.
Our wealth creation portfolio is up 16.32% since the beginning of the year with approximately 40% of the volatility of the S&P 500. This portfolio is not leveraged.
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