Here is a great chart from Deutsche Bank showing the changes in effective mortgages rates across various economies.
I think that's the key chart to understanding what's happening in the global economy this year and in the foreign exchange market. Rate hike simple haven't hit the US as hard because of the preponderance of 30-year fixed rates.
Meanwhile, some of the countries with the largest housing bubbles are being hit the hardest and will see sharper slowdowns in their economies.
"Economies with slower monetary pass-through will take longer to slow down and ultimately force a central bank easing cycle. In that regard, the US stands out as having one of the weakest policy transmissions in G10. It’s something we underestimated over the course of this year but may be the most important driver extending the strength of the dollar," writes Deutsche Bank.
This difference is exactly what I highlighted at the start of the year as my #1 trading theme in 2023.
AUD/USD started the year at 0.6800 and is currently at 0.6300. The trade may just be getting started.
