Australia dollar tumbles as US property booms

See the latest Australian dollar analysis here:

Macro Morning

Friday night DXY took off. CNY is a rocket:

The Australian dollar was belted across the board:

CFTC shorts have cleared to their lowest level in nearly two years at -20k, freeing up downside:

Gold eked out gains despite DXY:

Same with oil:

And metals:

Miners are iron ore incarnate:

EM stocks flew:

It’s a global junk party:

Treasuries steepened a little:

Not bunds:

Or Aussie bonds:

Stocks wow:

Data on the evening was focussed on the US and was mixed. JOLTS fell but remains trong. Industrial production is falling.

But both are going to firm ahead as tearaway US housing indicates a brighter future:

Housing Starts:

Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,608,000. This is 16.9 percent above the revised November estimate of 1,375,000 and is 40.8 percent above the December 2018 rate of 1,142,000. Single‐family housing starts in December were at a rate of 1,055,000; this is 11.2 percent above the revised November figure of 949,000. The December rate for units in buildings with five units or more was 536,000.

An estimated 1,289,800 housing units were started in 2019. This is 3.2 percent above the 2018 figure of 1,249,900.

Building Permits:

Privately‐owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,416,000. This is 3.9 percent below the revised November rate of 1,474,000, but is 5.8 percent above the December 2018 rate of 1,339,000. Single‐family authorizations in December were at a rate of 916,000; this is 0.5 percent below the revised November figure of 921,000. Authorizations of units in buildings with five units or more were at a rate of 458,000 in December.

An estimated 1,368,800 housing units were authorized by building permits in 2019. This is 3.9 percent above the 2018 figure of 1,317,900.

Finally, a decade on, the US housing market has returned to normal level of construction. And there is more ahead. Household formation is rebounding:

And the property glut is finally cleared:

The foundations of US households are strong. There’s more relief coming as we head into the Presidential election year. Either via Trump tax cuts or student debt write-offs from Democrats. And the consensus on tarrifs and the war on China ensures a greater proportion of the activity will remain at home than in the last several cycles, albeit also driving weaker global growth.

The comparison with Australia is stark where massive household debt is only at the beginning of a decade long shakeout as China goes ex-growth and the commodity income is crushed. Household formation is in trouble as income falls. An excess of property will prove very difficult to shift as these factors play out, notwithstanding the population ponzi.

Short, medium and long there is no upside to owning the AUD over the USD.

David Llewellyn-Smith


  1. I don’t see US economy doing well long term. It’s all just another bubble, but if the punters get excited over housing starts good luck to them.

    • bubbles are the only thing left to capitalist economies

      German economy since GFC is just one huge property/population ponzi bubble … they managed to inflate housing from one of the most affordable in Europe to one of the most unaffordable … and all of that just as the world went through a deepest recession in almost a century caused by that very same problem

  2. – The US Trade Deficit is shrinking since say early 2019. I consider that to be the most reliable sign of a weakening (US) economy. Every man and his dog will point to the shrinking oil imports into the US. But the US Trade Deficit grew in the last say 7 to 8 years in spite of shrinking oil imports.
    – The financial math was very favourable for the US between say 1994 and 2009. And that math now has turned its back on the US since 2009.

  3. such a fast growth of housing construction hasn’t been seen in USA since Texas property bubble in 80s when tens of thousands of homes were left empty and demolished

    what’s interesting is that excess homes built during bubble prior to GFC took mover a decade too absorb
    at the peak of construction boom, their rate of construction (even in the most booming states) has been much lower than ours – in terms relative to population, population growth, to housing stock size, to anything … they never had construction boom nowhere near ours, even during few slower years since 2000

    • Excess supply becomes apparent once bubbles burst. We built a lot of crap nobody will want. All those disgusting apartment blocks etc..

      • Yes, and what that means in the future it anybody’s guess. The sensible thing to do would be merging two into one (assuming they’re structurally sound enough to do that) and try for larger, more family friendly boxes. Current prices that’s an insane proposition, but with 60% – 80% price drops it might be a thing. Still shyte, but better than the current sky slums for the debt devotees.