Australian dollar universally bought

What a difference a day makes. DXY was down, EUR and CNY up:

AUD was universally bought:

Gold struggled:

Oil too:

Metals did better:

Big miners continue the ascent to heaven:

EM stocks look poised for breakout:

Junk fell:

As did Treasuries:

And bunds:

Aussie bonds entered the woodshed:

Stocks soared on:

Westpac has the wrap:

Event Wrap

The US ISM services sector PMI printed on the low side of expectations at 56.1 (est: 58) from 59.7, an 18-month low though still consistent with reasonable growth momentum; new orders slipped but employment encouragingly held firm.  The ADP survey of employment showed a lower than expected gain of 129k vs an upwardly revised 197k in the prior month, flagging a loss of hiring momentum though the track record of this report as a gauge of payrolls (due later this week) is an open question.

Markit’s services sector PMI for the Eurozone was revised higher for March, to 53.3 from a preliminary estimate of 52.7, a welcome uptick. Regionwide retail sales rose 0.4%, also stronger than expected, though the prior month was revised lower.

Event Outlook

Germany: Feb factory orders is released after the PMI signalled contraction in the manufacturing sector has worsened in 2019.

Euro Area: Mar ECB minutes will be examined for any indication on possible TLTRO-III incentives and members’ views on alleviating some of the burden of negative interest rates on banks (in relation to recent discussion on a tiered deposit rate).

USFedspeak involves Kashkari in North Dakota and Mester in Ohio.

US data was softish with the greater worry being the stalled ADP number:

Private sector employment increased by 129,000 jobs from February to March according to the March ADP National Employment Report®. … The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.

…“March posted the slowest employment increase in 18 months,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Although some service sectors showed continued strength, we saw weakness in the goods producing sector.”

Too early to call that a trend and the ISM at 56 is still very good:

The NMI® registered 56.1 percent, which is 3.6 percentage points lower than the February reading of 59.7 percent. This represents continued growth in the non-manufacturing sector, at a slower rate. The Non-Manufacturing Business Activity Index decreased to 57.4 percent, 7.3 percentage points lower than the February reading of 64.7 percent, reflecting growth for the 116th consecutive month, at a slower rate in March. The New Orders Index registered 59 percent, 6.2 percentage points lower than the reading of 65.2 percent in February. The Employment Index increased 0.7 percentage point in March to 55.9 percent from the February reading of 55.2 percent. The Prices Index increased 4.3 percentage points from the February reading of 54.4 percent to 58.7 percent, indicating that prices increased in March for the 22nd consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector’s growth cooled off in March after strong growth in February. Respondents remain mostly optimistic about overall business conditions and the economy. They still have underlying concerns about employment resources and capacity constraints.”

Meanwhile, financial conditions have already loosened a lot:

With mortgages surging:

I have long expected a US slowdown this year with the “fiscal cliff” and Fed tightening but it still looks well in hand. The US still has a better outlook that a China-dependent Europe though right now sentiment is pretty equal:

If China rebounds more strongly that I expect then so will EUR and AUD. If not, DXY remains in control and AUD weak. Still favour the latter.

Comments

    • Would you say they are getting much bang for their buck? Or are we just seeing the glide path stabilise, and not much more?

      • Think EURO is being bought by ECB
        ECB must have so many southern euro bonds on their balance sheet as well as long euros as capital moves from Southern European countries to Germany and Switzerland who else would be buying those Italian Greek bonds at nearly same yield as US only ECB could be
        Similar to when Swiss has the peg, they were keeping Swiss weak so buying Euro selling Swiss
        Thd smart players were long chf
        SNB took a bath
        Wait until EU elections, there will be a big change in EU parliament in late May/June then draghi leaves in Oct, wait til Xmas Euro will crack eventually taking down ECB. Then spread through Euro banks
        Draghi wants to be Italian prime minister, so he needs to keep things going as long as possible
        There’s a genuine strong bid for USD, especially from emerging markets, Turkey has brought in capital controls to support the lira its hard to get money out of turkey Euro will eventually break lower but maybe second half of the year after we take a few shorts out
        I know Damien thinks 1% low on Aussie 10 year but I think the AUSSIE 10 year bond will go negative.
        As households get hammered and Aust banks collapse QE I think because Aust gov has low debt people will pay a fee to park in AUSSIE bonds
        China stimulus has a weaker effect each time and with European economy slowing and now the US China’s exports can’t not be affected
        The world isn’t that big, Aussie 10 year might get above 2% but think it’s headed to zero
        Nothing goes in a straight line with CB interference
        The debt will never be paid back there is not enough income to pay off
        USD is still safe haven with Aussie bonds, money is being parked in US treasuries

      • Greed is trumping fear right now. Over 4trillion RMB of new credit in a single month is a lot of bang.

        2019 is the 70th anniversary of the CCP. Expect the economic kitchen sink.

      • proofreadersMEMBER

        @bcnich – at what funding interest rate do you see the Strayan banks’ hot money funding exiting stage right?

      • I honestly don’t know the answer to those detailed things re bank collapse etc
        I’d say look at politics looks like shorten labor for 2 terms maybe
        He will protect the less well off
        So I think bail in for sure protect deposits up to $100k to $250k and take a huge slice of above deposits
        MB knows all those things I’m not sure but normally at the bottom of what ever happens

  1. Q So why is AUD still 7115, when it’s normally buy the rumour sell fact ? with China mini boom, AUD short DXY lower Iron Ore up Aust yields up ??