See the latest Australian dollar analysis here:
AUD is up away to its highest levels since August as risk flowers on the US/China deal:
Bonds are hosed:
XJO is up 1.6%. US futures even more:
Big Iron up:
Big Gas up:
Big Gold down:
Big Banks up:
Big Realty up but not much:
This rally is a great chance to set some shorts.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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Macro Afternoon
Heading into tonight's US non-farm payroll
Macro Morning
By Chris Becker Risk markets finally
Do robots dream of higher Australian dollars?
DXY is getting belted now as EUR surges into the
Macro Afternoon
Stock markets are yet to take a breather
ASX up 80 points on the open. WTF?
On Friday ASX dropped on fears of increased tensions between USA and China at the G20 meeting. China and USA instead agreed not to increase tariffs beyond 10%.
For 90 days unless a bigger agreement is signed.
It’s a stay of execution, with the possibility of a pardon.
When to re add shorts? I just got stopped out in the open
Andy
I would be careful shorting ASX
AUD shorts need to be taken out 75/76c I think they’ll be gone
Think as AUD falls next year into Aussie rate cuts, 10 year Aussie bond yield to 2.20/30% I think ASX might find support
I think the trade of the year next year will be long DXY at 95 around if the AUD gets to 75c to convert into USD
I am not a gold bug, but I think if Aussie rallies and gold falls a little I think picking up gold in Aussie dollars under 1600 might be ok too.
Think 2019 will be the year of Europe blowing up and taking Britain with them
Let’s see
It’s a tough game
Yep. I am thinking March 2019 is AUD splat time when the Trump 90 day deal expires and we get the December qtr national accounts. Until then it could go up further from its current level (although maybe this week’s data will weigh a bit). Maybe look at levels in Feb re AUD shorts, what do you reckon bcnich?
Went to a Business Insider event last week, the panel were all adamant the RBA won’t cut. Bill Evans seemed to imply they wouldn’t even go lower if it turns nasty, but just resort to QE. Went on to say that he expects Phil Lowe to remain on hold for as far out as his forecasts go, but does not expect him to follow Glenn Stevens in cutting to save housing. Phil Lowe is focused elsewhere, specifically unemployment. Consensus seemed to be there was no clear justification and it would only make things worse in the medium to long term to cut.
The Kouk was the only one calling for cuts; for reasons much covered on MB (only MB is pragmatic about it, whereas he wants them to juice housing again)…. jeez he’s a drop kick. At one point he was going on about it never being a better time to buy. Everyone cracked up in laughter, which he didn’t seem to appreciate lol.
Even the fact that he contradicted himself within successive comments. Said that they should cut to save housing, specifically mentioning the need to resuscitate the wealth effect and consumer spending….but then 5 seconds later went on to say that they shouldn’t cut to save housing, but use the cuts to ignite business investment (using macro prudential to curtail house prices). I think it was the ANZ economist, Joanne Masters, who shot back saying we’re already seeing record business profits.
They’re all bearish as fark about 2019 (Kouk included), especially the fund managers that were present (they actually need to trade on this stuff).
this is a reply to Brenton
I find it hard to believe that RBA may not cut, but I accept your points they are valid
Honestly the Kouk and Bloxo, how do they get paid
That’s the great AUST Fraud perpetuated on the Aust people, the KOUK and Bloxo considered to be 2 prominent economists
Kouk wants cuts so he wins that bet, The Q is who is the biggest goose of the 2
Brenton
I’ve been bullish ASX for quite a few reasons but have been poopooed
ANZ saying record business profits
My feeling is ASX is over sold
AUD is like a never ending last chance saloon
Topped up my USD pretties
US construction going down
https://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-ecri-lakshman-achuthan-business-cycle-turning-point-housing-construction-crumbling
Why would you bother making an agreement with the yanks at the moment ?………they change with the wind……..phoney war until after the winter break………..Mr trump must have been talking to Mrs May on the weekend……..same tactics as she is using.
https://moneymaven.io/mishtalk/economics/trump-threatens-to-kill-nafta-if-congress-doesn-t-approve-his-new-deal-etkCo3h3zk-CgV8CdXXR6g/
Santa, is that you?
This year, there’s two – one is The Donald and the other is Xi Jinping.
Although China US, Russia and Saudi are having a little love fest markets don’t seem focused on Europe
Draghi leaves in 19 to Antarctica or an unknown Island in the pacific
ECB are going to reduce asset purchases and then the problem is there won’t be any buyers of Italian bonds
Germany
– Deutsche Bank shares are nearly wiped out (I am watching closely and it looks like a disaster)
– Merkel is going to get booted out next year
_ German election in 19 I think
France
-Riots and Macron plunging, I think Elections in 19 too
Italy is a sleeper, Greece will rear it’s ugly head
Brexit
Think focus has gone off the EU Britain etc and that’s the EPICENTRE
you got it right bcnich ….. personally I remain puzzled at the lack of commentary on MB (and more generally) about the unravelling of the EU and the inevitable consequences for the Oz economy ….
Oz banks do get a lot of funding from Europe, the flow on events could be messy.
I well recall AUD USD reflation was discussed in the Nucleus Wealth podcast about six weeks ago. Is MB upgrading its end of year forecast which the last time I knew was at 0.72?
It’ll have to hurry, but they might wait until this week’s national accounts etc come out first…
Arrow
I think with less conviction than normal and I am not trading now, really just long term positions hedging
MB is right that market is short AUD so seems to be squeezing higher but I think that 2019 wont be driven by long or short positions because I think there are going to be much bigger things at play.
Think discussions are around US China but think that Europe is being forgotten
I like short AUD in mid 70’s might SQ higher, I don’t think it will get even there but short term hard to tell
I am not as bearish on equities even though I should be.
I am concerned about Euro banks, Euro gov bonds and rising rates in Europe
I don’t believe equities are affected by small moves in rates
I am not a gold bug, never have been and have been in the camp it might come off over next 18 months but it’s holding firm and think that in AUD might be worth buying some physical gold
Think RBA will have to cut next year, Aussie bond yields lower, think that will provide support to ASX but I am long ASX with less conviction
Oil seems to have a new range 40 to 60, I was in the long oil camp but got that wrong
Think ASX 5500 to 6000 and higher if Aussie rates go lower and drag the AUD down
I’d be long DXY on dips for 110 next year
I did like the GBP but I think UK is going down with Europe, I did have pounds but got out above 1.30
I think Dow 24,000,27,000 but I think we may break 30,000 next year, maybe need to test lows at 23/24k not sure
Like USD still into 2020 then I might move to EM currencies/countries that have very low debt, that’s if we see DXY above 120, i next 2 years
Not sure about FED but I don’t think the short end matters as much as the 10 and 30 year US bond yields and think there will be a supply demand issue, someone needs to buy the 2 trillion in USD treasuries on issue (FED QT and US Deficit) so think we will see 4% at the US long end next year even if Fed slows down tightening.
I think we are all trying to guess from the available info we have.
Cheers bcnich – always appreciate your views
“I am not trading now, really just long term positions hedging” – yes, me too.
Anything above 73 and I am watching closely to get out of AUD, I still think 0.75 is possible.
Arrow
I think we may have seen the top in the AUD at 7395
Just a feeling
Let’s see what RBA says but they have to start to admit to poss cuts today or by Feb
HNH has been very accurate and he thinks higher before lower
It’s been a good bounce from 70 to 74
Anyway just a feeling
I was a little annoyed when my bank changed its trading platform. I missed the memo and didn’t realise all of my conditional trades were lost. Long story short (there’s a pun in there, somewhere), my USD sell didn’t trigger and this rally is now making me particularly annoyed!
Ouch… 🙁
Yes that is annoying