Shorts Scramble To Cover As Aussie Surges To 2-Year High

If you thought the aussie was done rallying, you were wrong.

Because we got the RBA minutes and the market is laser-focused on the comments about growth – or at least that’s what it looks like from where I’m sitting.

Specifically, the RBA said quarterly economic growth likely rose in 2Q and added that recent labor data has taken some downside risk out of the wage growth forecast.

Here’s the reaction:

That, ladies and gentlemen, is a more than two-year high:

“The market is extrapolating the RBA’s acknowledgment of firmer global prospects and its comment that neutral rate is 3.5%, to a central bank with its finger on the trigger to hike,” Sue Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong told Bloomberg.

Everyone “is focusing on the positivity in the minutes, and talk of neutral rates at 3.5%, is well above market pricing,” adds Jarrod Kerr, senior interest-rate strategist at Commonwealth Bank of Australia in Sydney.

This had aussie shorts scrambling to cover as leveraged accounts holding short AUD/USD positions were forced to square them up through 0.7810, an Asia-based FX trader remarked.

One certainly imagines that was turbocharged by concurrent dollar weakness.