Where’s the ever bullish Bloxo? Via HSBC:
“The deceleration in the flow of housing credit has been evident since at least early 2018 but has only recently come into focus due to a flurry of weakness in indicators of domestic demand.”
“This includes a weaker-than-expected Q3 GDP print, the biggest monthly drop in surveyed business conditions since the Global Financial Crisis, a 22.5% year-ended fall in building approvals and monthly retail sales that turned negative in December, confirming two soft quarters of consumer spending.”
…“In the case of a credit squeeze, the labour market tends to be a lagging indicator, suggesting a proactive easing of policy is unlikely.
“Instead, more of the initial burden may end up falling on the currency to act as a shock absorber for the rest of the economy.”
“In the ‘ugly contest’ of G10 FX, we still think the AUD looks unattractive versus the higher carry and reserve currency status of the USD”.
“Our forecast remains for AUD/USD to trade down to post-crisis lows of 0.6600 by year-end.”
Strange argument but the result is right. The RBA will cut twice this year and the AUD get hammered.
David Llewellyn-Smith is chief strategist at the MB Fund and MB Super which is long international equities and local bonds that will benefit from a weakening Australian economy and dollar so he is definitely talking his book.
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