See the latest Australian dollar analysis here:
DXY eased overnight as CNY fell and EUR firmed:
The Australian dollar catapulted higher against DMs after the Lunatic RBA fell behind the curve on easing again:
EM stocks fell:
Ominously, EM junk crashed:
Treasuries were bid:
Aussie is stuck with the Lunatic RBA:
As soon as the Lunatic RBA held yesterday, the AUD climbed non-stop. It was then aided by weak US data as the ISM joined the global manufacturing recession:
Economic activity in the manufacturing sector contracted in August, and the overall economy grew for the 124th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.
The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The August PMI® registered 49.1 percent, a decrease of 2.1 percentage points from the July reading of 51.2 percent. The New Orders Index registered 47.2 percent, a decrease of 3.6 percentage points from the July reading of 50.8 percent. The Production Index registered 49.5 percent, a 1.3-percentage point decrease compared to the July reading of 50.8 percent. The Employment Index registered 47.4 percent, a decrease of 4.3 percentage points from the July reading of 51.7 percent. The Supplier Deliveries Index registered 51.4 percent, a 1.9-percentage point decrease from the July reading of 53.3 percent. The Inventories Index registered 49.9 percent, an increase of 0.4 percentage point from the July reading of 49.5 percent. The Prices Index registered 46 percent, a 0.9-percentage point increase from the July reading of 45.1 percent.
“Comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI® expansion that spanned 35 months, with steady expansion softening over the last four months. Demand contracted, with the New Orders Index contracting, the Customers’ Inventories Index recovering slightly from prior months and the Backlog of Orders Index contracting for the fourth straight month. The New Export Orders Index contracted strongly and experienced the biggest loss among the subindexes. Consumption (measured by the Production and Employment Indexes) contracted at higher levels, contributing the strongest negative numbers (a combined 5.6-percentage point decrease) to the PMI®, driven by a lack of demand.
But, beyond that, conditions for a weaker AUD remain very strong. CNY keeps falling as Chinese stimulus remains incremental:
The stock market is showing the consumer the great beneficiary not investment:
And EUR is also very weak as the ECB pulls out its bazooka:
To fight a capitulating German economy:
As risk comes off, the AUD should be in free fall, but for the as always paralytically cautious Lunatic RBA.