Australian dollar jumps as trade deal “90% complete”

DXY  was stable overnight:

But the Australian dollar jumped across the board:

Gold was hit:

Oil rose:

Metals too:

An miners

:

EM stocks struggled:

Junk yawned:

Treasuries were sold:

Bunds too:

Aussie bonds were belted:

Stocks were stable:

Westpac has the wrap:

Event Wrap

US durable goods orders fell by a larger than expected 1.3% in May led by weakness in the always volatile aircraft category. Beyond that the May data showed some encouraging resilience for business investment; core capital goods orders posted a healthier 0.4% gain in May while core capital goods shipments, a proxy for business investment rose 0.7% in the month and the previous month was revised up to show a 0.4% increase from 0.0%. The US advance trade good report widened more than expected in May to $74.5bn from $72.1bn

FOMC member Daly said she’s uncomfortable with the low level of inflation, adding that the Fed may need to do more to get it back up to the 2% target.

President Trump reasserted his right to remove Fed Chair Powell from his post in a wide ranging interview with Fox Business, complaining that, “He’s not doing a good job”  but spoke glowingly of the ECB President noting, saying he should be at the helm, “We should have Draghi instead of our Fed person”. On trade, he threatened once again to impose tariffs on the remaining $300bn in goods from China if there’s no progress on a deal when he meets President Xi at the G20 later this week, “My plan B’s maybe my plan A, my plan B is that if we don’t make a deal I will tariff, and maybe not at 25%, but maybe at 10%. Trump complained about the weak yuan too, “They devalue their currency like a ping-pong ball.”

Event Outlook

NZ: the monthly business confidence survey (ANZ) has for some time been indicating slower economic growth. The May update ticked up slightly but remained in subdued territory.

Euro Area: Jun European Commission surveys are expected to show the business climate indicator edging down to 0.29 from 0.30 and economic confidence down to 104.8 from 105.1. Jun German and Spanish CPI are out ahead of the Euro Area release tomorrow.

US: Q1 GDP 3rd estimate is expected to revised up to a 3.2% annualised pace from 3.1%. May pending home sales data and the Jun Kansas City Fed index are released.

The big news was this:

Treasury Secretary Steven Mnuchin told CNBC on Wednesday the U.S. and China were close to a trade deal, and he’s optimistic that progress can be made during weekend talks between President Donald Trump and China’s Xi Jinping.

“We were about 90% of the way there [with a deal] and I think there’s a path to complete this,” he told CNBC’s Hadley Gamble in Manama, Bahrain.

He said he’s confident Trump and the Chinese president can make progress in stalled trade talks at the Group of 20 meeting. “The message we want to hear is that they want to come back to the table and continue because I think there is a good outcome for their economy and the U.S. economy to get balanced trade and to continue to build on this relationship.”

He did not provide any detail on what the final 10% of an agreement might entail, or what the sticking points are to completing a deal.

We can guess. The 10% is anything that will actually make it worth doing for the US. Ending forced technology transfers and IP theft and enforcement therein.

The Trump Administration can play this game for a long time to keep markets up but there is nothing actually new here.

Still, while the hope floats, so will the Australian dollar.

Comments

  1. Ronin8317MEMBER

    I think the 10% of the deal will be about China not buying Iranian oil, and Huawei’s CFO being able to leave Canada.

  2. Agree 100%. It has been 90% done deal for the last 6 months so nothing changed. But fascinating to observe. If US cuts a deal now it means US capitulated and agreed for China to overtake US economically within 10 years max. The 10% US wants is the part China will never agree to – China to be just provider of cheap manufacturing labour.

  3. DominicMEMBER

    I thought it was confirmed a short while ago that this was an error on behalf of CNBC. Mnuchin actually said the a trade WAS 90% done — referring to what negotiations achieved some time ago before things stalled. It was reported that Mnuchin said a trade IS 90% done (as if a recent development).

  4. TailorTrashMEMBER

    You can take it to the bank that the 10% that China is resisting on is 90% of the material issue of the trade imbalance
    Trumps smarter advisers know that and will be holding him in check from that so wanted all smiling done “deal“ photo op conclusion next week .

  5. TheRedEconomistMEMBER

    With equities… how much of it would be EOFY squaring up positions/taking profit or bring forward losses?

    Anyone got ideas on opportunities?

    ASX seems a bit toppy at the moment??

    Or

    …..with rate cuts to come.. what ASX Top 100 stocks should head north in this environment?

    Thoughts?

    • Everything is expensive…

      I can’t commit to any stocks at the moment, as I’m too anxious about things…even with interest rates going down and stimulus, etc, everything seems tired, fatigued, like it wants to roll over.

      Even gold stocks – I’ve just sold out of a position for a 10% gain in a week, just yesterday (good call for once!).

      I may buy some more USD soon; I’ve also been selling short-end bonds and picking up longer-dated bonds, which has also gone well; bond ETFs are also still going well.

      Other than that, it seems like a stock-pickers game at the moment, trading day-to-day or week-to-week, which is not my thing normally.

      Yep, so I don’t really know what to do either!