MUFG analyzes the fading momentum of the Australian dollar and increasing depreciation risks for the Turkish Lira amid political and energy shocks. The report also highlights a new regime for G10 currency reactions to US inflation data.
Key Takeaways
- 1.The Australian dollar's (AUD) period of outperformance is likely ending as RBA hawkishness is priced in and global growth risks, particularly from China, intensify.
- 2.The Turkish Lira (TRY) faces significant downside risk due to a combination of energy-driven terms of trade shocks, record reserve drawdowns, and new political instability.
- 3.US CPI reactions in G10 FX have shifted into a new 'oil regime' since March 2026, characterized by more two-way price action and a renewed focus on USD directionality.
Table of Contents
- FX View: Optimism elevated but FX response muted
- AUD: Advance could be running out of steam
- RBA hiking done for now
- China/global growth risks a growing additional challenge
- US yield move higher could run further
- If the strength of risk appetite fades and global growth concerns increase AUD could be hit by relative rates move
- TRY: Domestic political adds to downside risks for TRY from energy shock
- Weekly Calendar
- Open Trade Ideas
- Closed Trade Ideas
- FX Portfolio
- FX Positioning
- JPY Flows – Balance of Payments
- G10 FX Reactions to US CPI
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Authors
Derek HalpennyLee HardmanAbdul-Ahad Lockhart
Securities
AUDUSDUSDTRYUS 2-Year Treasury YieldGBPCHF
Themes
Geopolitical De-escalation vs Market SentimentMonetary Policy DivergenceInflation Regime Shifts
Regions
Asia PacificMiddle EastEuropeAustraliaTurkeyUnited States