Australian dollar crash a taste of what’s to come

DXY eased as EUR lifted while CNY fell:

The Australian dollar roared back just because! The NZD did not:

EMs are getting belted:

Gold is now a rocket:

Oil a falling anvil:

Metals are lost:

Miners screwed anyway:

EM stocks held on:

Junk did better than it should:

As Treasuries rallied:

OMG, bunds:

And Aussie bonds:

Stocks fell then firmed:

Westpac has the wrap:

Event Wrap

German industrial production plunged 1.5% in June to be down 5.2% on levels a year ago, a much steeper than expected fall, with weakness reported across all major sectors. The prior month was revised lower too.

Dovish Chicago Fed voting President Evans said developments since the Fed’s last meeting present fresh headwinds to the economy and will warrant more easing.

Event Outlook

NZRBNZ Governor Orr speaks to Parliament about yesterday’s Monetary Policy Statement.

AustraliaRBA Assistant Governor (Financial System) Bullock speaks on ‘Financial Stability through the Lens of Business’, 7:30 am AEST.

China: Jul trade balance is expected to be a $41bn surplus, down from $51bn in Jun.

Euro Area: the ECB bulletin is released which could contain some clues on the nature of the upcoming stimulus package.

The big release on the night was German industrial production which, unsurprisingly, fell sharply:

It has turned from an export to domestic problem:

Job losses are next:

Followed by a loss of momentum in the services economy:

Construction is already faltering:

And all of that before a hard Brexit hits in ten weeks time.

Europe is now a lock on recession and it is odds on that it will lead the global economy down into one as well. It’s obvious that the ECB is going to have to do “whatever it takes” again.

Why the EUR would rise in this environment, you might well ask yourself.

Likewise for the Australian dollar. The RBA will have to follow the RBNZ. Indeed it will have to do MOAR than the RBNZ given its economy is much the weaker, and its external shock is building into something much greater, even if it does not know it yet.

Yesterday’s Australian dollar crash was only a taste of what’s to come.

Comments

  1. Its up today a bit…. you are right its defintely the future for the currency. If Govt ever implements QE do you think that will kill the AUD even further?

    • Australia was just put on debt notice by the ratings agencies – and had its access to EU finance markets removed due to such poor standards – basically said we were corrupt. This was along side countries like Argentina and Brazil.

      Our gross government debt has gone from 10 Billion to 500 billion in a decade. from 8% of GDP to 40% – that is totally insane. At the same time private debt is at 200% while household is at 130%.

      Do you think unleashing a ten foot bore of cash across our economy wont have an effect ?

      The lols.

      Consider what would happen if Haiti printed enough cash to buy Florida.

      • Wow the agencies and maybe the investors are starting to realize all the crap that has come out of Australia over the years…..

      • Corrupt, vested interests? Yep, even our most famous Royal Commissioner says as much.

        https://www.theage.com.au/politics/federal/kenneth-hayne-trust-in-politics-has-been-destroyed-20190807-p52evf.html

        ‘Banking royal commissioner Kenneth Hayne has launched a rare attack on the political establishment, accusing it of being captured by vested interests, destroying public faith in institutions and reducing policy to three word slogans.

        In his first public statement since handing down the findings of the financial services probe in February, Justice Hayne contrasted the independent and transparent nature of royal commissions against the “opaque” and “skewed” decisions of politicians influenced by those “powerful enough to lobby governments behind closed doors”.’

        Not sure I’m entirely convinced of the ‘independent and transparent’ nature of the RC. There were massive attempts to hijack that too. We’re no better than the modern day banana republics.

      • The Traveling Wilbur

        Some new form of contraceptive device?
        Is it effective? (asking for a friend)

      • MountainGuinMEMBER

        Back in the 90s I recall any potential impact to our credit rating was big news and Keating, Howard or Costello would make public statements about their plans to keep it improve the rating.
        Now there is barely any reporting. News.com.au has decided to run with 5 bikini / model stories today… obviously far more important.

      • Also countries like Singapore and Canada got the same EU treatment but that probably spoils the narrative a bit.

      • Going to be fun watching IO and employment drop, then the panic as houses resume plummeting. Bank runs by Christmas?

    • Interesting that US consumers are not taking on debt to buy cars and houses. Looks like it’s the fault of millenial kids. But can anyone blame them after 2008? I certainly won’t borrow to buy cars and for a house only wish to borrow a small amount.

      If that kind of thinking won’t create inflation like they want, so be it. It just means their economic model is wrong and these wall street all time highs are being driven by corp debt borrowing to so share buy backs.

      Crazy times. No wonder folks are buying Gold.

      • “It just means their economic model is wrong ”
        That’s silly! Everyone KNOWS that all they have to do is print more money. Real production doesn’t matter. If Banks are prosperous we all are.

  2. I know it makes sense to use NZ as a straw man in your arguments on Australia, but you’re simply wrong that Australia is much weaker than NZ. Both are lousy.

    NZ Services PMI, ANZ Business Outlook and the Manufacturing PMI New Orders-to-inventory ratios all suggest growth in NZ is barely positive and on a per capita basis, falling. Forestry prices have dived, dairy prices are struggling. The government is a lost cause…

    Apart from the nonsense HLFS – which makes the ABS Employment Report look like a poster child of how to survey the labour market – there’s really nothing to suggest NZ is doing at all well.

  3. flawse is back!
    So Aus debt in 12 years has gone from a smallish number to a big number, US debt has got even bigger, Euro debt?, big banks everywhere debt? Who holds this stuff? Does it ever have to get repaid? What eventually happens to all this debt?