Australian dollar marks time with global growth

See the latest Australian dollar analysis here:

Macro Afternoon

DXY was firm over Easter with EUR and CNY soft:

AUD fell against DMs:

And was mixed against EMs:

Gold is fading:

Oil is surging:

And building nice little inflation shock within six months:

Base metals were soft:

Big miners too:

And EM stocks:

Plus junk:

Treasuries were sold:

Bunds bought:

And stocks firm:

Westpac has the wrap:

Event Wrap

US existing home sales fell 4.9% in March, a steeper than expected decline, but that follows an outsized 11.2% increase in the prior month. US housing starts were also on the weaker side despite lower mortgage rates, slipping 0.3%, below expectations for a 5.4% gain.
Reuters reported that the United States demanded a cessation of Iranian oil exports to major importers, such as China and India, who had been granted exemptions from sanctions. Crude oil prices rose to six-month highs, in response, on fears the US action could restrict supply. Secretary of State Mike Pompeo, in a briefing on Monday, said the aim was to halt Iran’s exports entirely, as it continues to pressure Tehran to curtail its nuclear program, ballistic missile tests and support for conflicts in Syria and Yemen.


NZ: Electronic retail spending has been growing at a 6%+ pace this year, with government stimulus benefitting households.
Euro Area: Apr consumer confidence is expected to edge up to -6.9 from -7.2, with sentiment having stabilised in recent months.
US: Mar new home sales are expected to bounce 4.9% following a 2.6% decline in Feb.

Readers will know that MB has shifted its outlook a little on surging Chinese credit. We are looking for a modest European rebound ahead as US growth slows.  Some data supported this view over the break with Chinese bond issuance surging:

And car sales rebounding:

But it is still too early for Europe to track higher. PMI improved marginally in the second derivative but were mostly weak:

▪ Flash Eurozone PMI Composite Output Index(1) at 51.3 (51.6 in March). 3-month low.

▪ Flash Eurozone Services PMI Activity Index(2) at 52.5 (53.3 in March). 3-month low.

▪ Flash Eurozone Manufacturing PMI Output Index(4) at 48.1 (47.2 in March). 2-month high.

▪ Flash Eurozone Manufacturing PMI(3) at 47.8 (47.5 in March). 2-month high.

Given we are of the view that the recent surge in Chinese industrial production is complete horseshit, this is not surprising. It’s over H2 that we expect to see Europe firm as China’s credit deluge makes its way into firmer imports.

Meanwhile, US growth was mixed with a strongly rebounding consumer:

But still weakening property:

I hold no real fears for the US. There’s a further softening coming but no worse.

Until Europe firms up and improves relative to the US, the AUD will not rise.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. Think we may see the dollar break 98/99 this time, and Aust dollar bond yields 10 year break lows 1.73% over near term.
    Strong DXY might drag AUD further, I’m hoping we get a chance to buy ASX under 6,000 again for 7,000, with Australian 10 year around 1% end of this year and 0% end of 2020 before possible negative Aussie 10 year
    Think higher oil and lower AUD will push petrol at the pump 1.80/90 and possible $2 this year, this will have the effect of pushing AUD bond yields lower than normal quicker as RBA cuts and Australia goes into recession later this year
    Think we might get a chance to enter equities 5/8% lower and US equities 15% lower for good buying
    Read a guy with a strong track record saying at $40s in oil that we were going to test $100s again
    Think iron ore has topped here at $95 around and gold into 1100s again as dollar rises
    Anyway a few guesses, MB has been best predictor over the last year, not sure about the China and Euro call, think Euro is going to fall H2 but that may push Euro equities higher on lower currency which offets. I just can’t see how China won’t be affected as Europe slows their purchases from China
    Think Global recession H2
    Anyway we will see, this guessing is getting harder
    Someone posted that Perth property article, read every article in MSM while overseas Kohler Kirby financial planners saying its time to buy dip in Aussie property, it’s going to get mighty ugly into end of 2020 when prices are a solid 30 to 40% lower across the nation, there’s going to be lots of tears.
    Also all it takes is a couple more terror attacks in big cities and people will stop travelling. I was in Singapore yesterday and said to my GF, if a bomb went off here, I think people will stop travelling.
    Just feels like the times of a decade ago 9/11 and that disease that stopped people travelling
    Think global slowdown in H2 will catch a lot by surprise.