Australian dollar still weak as global reflation sputters

See the latest Australian dollar analysis here:

Macro Afternoon

DXY was up again last night as EUR fell:

The Australian dollar was weak again vs DMs:

Not as weak as EMs:

Gold held on, just:

Oil too:

Not metals:

Miners sank:

EM stocks too:

But junk was OK:

As all bonds were bid:

Stocks eked out new highs:

Westpac has the wrap:

Event Wrap

Pres. Trump said in a speech to the Economic Club of New York, regarding a US-China trade deal, that “we’re close – a significant Phase One deal could happen soon”, adding that he’ll only sign it if it is good for American companies and workers.

FOMC member Harker said he was against the Fed cutting last month, and that he now preferred a wait-and-see approach.

Event Outlook

NZ: The RBNZ MPS at 2pm this afternoon is widely expected to announce a 25bp reduction in the OCR to 0.75% – a record low. Key for markets will be forward guidance signals (via language and OCR forecast). Governor Orr will deliver a press conference at 3pm.

Australia: Nov Westpac-MI Consumer Sentiment is released following the 5.5% drop in Oct which took the index to a four year low. Q3 wage price index is expected to rise 0.5% and see the annual pace slow to 2.2%yr from 2.3%yr. Westpac’s forecast is 0.7%, 2.4%yr.

US: Oct CPI is expected to be up 0.3%, 1.7%yr for the headline measure while core inflation increases 0.2%, 2.4%yr. Fed Chair Powell addresses the congressional Joint Economic Committee. Other Fedspeak involves Kashkari in multiple speeches in Wisconsin (first speech at 10 am AEDT).

El Trumpo was pretty negative but the market took it in its stride, via Bloomie:

President Donald Trump said the U.S. will increase tariffs on China in case the first step of a broader agreement isn’t reached.

“If we don’t make a deal, we’re going to substantially raise those tariffs,” he said Tuesday in a speech to the Economic Club of New York. “They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.”

China is “dying” to make a trade deal with the U.S., Trump said, adding that he’d only sign it if it’s good for American companies and workers. Still, “we’re close — a significant phase one deal could happen, could happen soon.”

Meanwhile, there is no change the better US, worse EU dynamic that has dominated forex for two years. German industry is struggling wuth the ZEW very gloomy:

Though hope lifted to -2.1 vs -13.0 expected. The PPI says it all:

And the consumer is more and more drawn in:

Whereas the US is still solid:

The small business half of the economy continued its remarkable economic streak, posting a 0.6 point gain in October’s Optimism Index. The 102.4 reading was buoyed by eight of the 10 Index components advancing, as talk of a recession waned in October. The Uncertainty Index declined 4 points but remains historically high heading into an election year.

…Twenty-five percent of the owners selected “finding qualified labor” as their top business problem, more than cited taxes or regulations. Reports of higher worker compensation rose 1 point to a net 30 percent of all firms – a historically high reading. Plans to raise compensation rose 4 points to a net 22 percent.

So I still can’t see any swing away from a strong DXY, especially since China is still slowing as well:

Which will hold back the European export machine.

Still bearish AUD.

David Llewellyn-Smith
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