Rampant greenback mows down Australian dollar

DXY has broken out and has the ears pinned back as EUR tumbles:

The Australian dollar held on at the brink again. It has a horribly bearish descending triangle chart but its benefitting from “buy the dip” a la US stocks:

EM forex was even weaker:

Remarkably, gold is runnig hand-in-hand with DXY:

Oil is still trying but is literallly sloshing all over the floor:

Metals were hit:

Miners fell:

EM stocks too:

And junk:

Bonds were bid:

And, lo, stocks bought the dip:

Westpac has the wrap:

Event Wrap

The NY Federal Reserve’s Empire State survey rose sharply from 4.8 to 12.9 (vs 5.0 expected). ISM-adjusted, it’s at a 15-month high. The survey likely captures the phase-one US-China trade deal plus fall in Brexit uncertainty, but is yet to capture the coronavirus pandemic impact. NAHB homebuilder sentiment slipped from 75 to 74 (vs 75 expected), still near a multi-year high. Low mortgage rates and a strong labour markets have supported the housing market.

German ZEW economic confidence survey fell from 26.7 to 8.7, optimists continuing to outnumber pessimists, although the report does suggest a weak Q1 GDP outturn.

Last night’s GlobalDairyTrade auction saw prices for most products fall, the headline index down 2.9%. Our key export product – whole milk powder – fell 2.6%, matching yesterday’s futures market predictions of a 3% fall. At US$2966, it is at the bottom of past 12-month range of $2966-$3330.

Event Outlook

Australia: Another sub-par wage price index print is expected in Q4, with Australian wages forecast to rise 0.5%, 2.2%yr. The January Westpac-MI leading index is also due to be released. In December, the index rose from -0.62% to -0.32%, pointing to sub-trend growth in early 2020.

In the US, housing starts and permits will be followed by the FOMC’s January meeting minutes. Discussion of the risks to the growth and inflation will be the focus for the market. Bostic, Mester, Kashkari and Kaplan also due to speak.

It was all about growth divergence again. With the US leading thanks ot the Richmond Fed and tearaway building confidence:

Builder confidence in the market for newly-built single-family homes edged one point lower to 74 in February, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. The last three monthly readings mark the highest sentiment levels since December 2017.

“Steady job growth, rising wages and low interest rates are fueling demand but builders are still grappling with increasing construction and development costs,” said NAHB Chairman Dean Mon.

“At a time when demand is on the rise, regulatory constraints along with a shortage of construction workers and a dearth of lots are hindering the production of affordable housing in local communities across the nation,” said NAHB Chief Economist Robert Dietz. “And while lower mortgage rates have improved housing affordability in recent months, accelerating price growth due to limited inventory may offset some of that effect.”

…The HMI index gauging current sales conditions fell one point to 80, the component measuring sales expectations in the next six months was one point lower at 79 and the gauge charting traffic of prospective buyers also decreased one point to 57.

Versus implosion in the hoped for European rebound: