1.FX Disconnect – AUDCHF at Extremes
The cross at a rare ~3σ rich level
Equities were priced for another Venezuela, not a 4–5 week protracted conflict. Hence risk-off.
The bond market is pricing Iran as a stagflation shock rather than recession or flight-to-quality. Real yields are higher.
FX is less coherent. A firmer Dollar fits, especially given crowded shorts, but on Qi the broad Dollar ETF (UUP) is now ~1.5σ rich. With only 60% model confidence, positioning and momentum may dominate near term.
More striking: AUDCHF has pushed to ~3σ rich. That’s only the second time in our database (back to 2009).
FX appears to be siding with bonds: commodity shock first & foremost. But Qi model value has slipped below 0.53 as higher VIX and wider credit spreads weigh. The Aussie has ignored deteriorating risk appetite so far. If equities drag the narrative back to outright risk aversion, AUDCHF looks exposed up here.
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