Rampant USD saves AUD blushes

See the latest Australian dollar analysis here:

Macro Morning

DXY is booming again as EUR crashes:

The Australian dollar is strong but DXY saved its blushes:

Gold is hanging but must at risk as DXY rampages:

Oil caught a bid:

And metals:

Plus miners:

And EM stocks:

Having discounted zero, junk is off and running:

Bonds were bashed:

Stocks euphoric:

Westpac has the data wrap:

Event Wrap

Eurozone Jan. industrial production reflected the weakness in national releases, contracting 2.1%m/m (est. -2.0%m/m), with the annual rate well below expectations at -4.1%y/y (est. -2.5%y/y).

Event Outlook

RBNZ Governor Orr will speak to the Parliament Select Committee this morning following yesterday’s release of the February MPS.

RBA Governor Lowe will be on a panel at the Australia–Canada Economic Leadership forum, 11:15am AEDT.

US CPI inflation is expected to remain above 2.0% on an annualised basis. The headline rate is expected to lift, but the core rate should remain around 2.3%yr.

And Europe will only get worse as the virus shock lands on its export model risking outright recesssion:

As the US consumer parties on:

Driven by solid wage growth and cheap energy:

Cheap mortgages:


Booming houses:

And releveraging:

The US consumer is in rude health.

We can be thankful that the runaway USD will cap the AUD as the RBA dithers.

David Llewellyn-Smith
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  1. https://www.scmp.com/print/news/china/article/3050327/coronavirus-still-stumps-experts-when-human-carrier-turns-infectious

    Michael Osterholm, director of the Centre for Infectious Disease Research and Policy at the University of Minnesota, said it was possible it could be transmitted by people before they become ill and there were “striking parallels” between Covid-19 and the flu virus, which can infect others during the incubation period.
    “The epidemiology screams ‘flu virus-transmission’,” he said.
    “With Sars, the majority of transmission took place between four to six days of illness so patients could be identified in the first several days of infection and isolated, which slows down the transmission.
    “I think this virus does not act that way.”

    It’s still looking like coronavirus can be transmitted during the incubation period (I.e before they show any symptoms). That’s going to make controlling it that much harder for Chinese returning to Tier 1 cities as people who are in the incubation period/asymptomatic or taking antipyretic drugs can make it past the temperature scanners.

    • The problem with bcnich’s predictions is that it doesn’t take into account the rampant money printing. I read a joke the other day, it went long the lines of ” the year is 2050, a global apocalypse has destroyed all human life, but in the basement of the FED a lone computer continues to bid the markets to new highs.”

      Asset prices no longer represent fundamentals, they represent the amount of money being printed.

      • As you say, it’s only ‘partly’ a joke – I’m fairly confident the near and medium term future will look exactly like that.

        The natural constraint to the money printing exercise is the moment when the average Joe wakes up to the fact their standard of living is going backwards at a rapid clip owing to rampant inflation — then you get hyper inflation and all fiat money becomes worthless. There are people in the world who think money printing is entirely sustainable without consequence, but that’s another story.

        The truth is, contrary to the official line of ‘inflation is too low’, we’re actually seeing its insidious effects as we speak. I can tell you that my grocery bill, utilities bill, rates, various insurances, healthcare costs, school fees etc are not suffering from ‘low inflation’ right now. The only thing that has eased in recent times is the mortgage service cost. Aside from that, everything else has inflated handsomely – certainly, way beyond the ‘official’ rate. And I’m fairly confident I’m not alone in experiencing this.

        • Yeah spot on. I’m also experiencing exactly the same regarding inflation. The CPI is grossly inaccurate and this is for good reason, because if it were not they wouldn’t be able to hide behind it to lower rates and print money.

          I’ve recorded every transaction I’ve made in a spreadsheet over the previous 10 years or so. I’ve been meaning to go through all the data to see how much my non discretionary expenses have increased over this time. That might be a better indication of real inflation.

          • Collating the prices is something I wish I’d done myself – just to refute the low inflation claims. My insurance premiums – cars, home, rego, whatever – all go up faster than the CPI every year. Guaranteed.

        • Jumping jack flash

          Exactly this!
          The inflation measure is an absolute joke. Pretty much all the inflation caused by rampant debt expansion is canceled out through sleight of hand, or deemed irrelevant. It is through no accident that this is the case.

  2. Jumping jack flash

    That last graph is the key!
    Thanks for posting

    Note the slope on the debt expansion leading up to the 08 event. Note the slope of recent times.
    This derivative is the difference between a booming economy and one that is crashing.
    Even though we have more debt than ever, it isn’t having the same effects as it did back in 06. 06 was the peak of the golden age of debt. 06 is also where this slope was the steepest.

    The solution is to expand debt faster. Much faster.

    Australia needs to hit 7 trillion debt dollars by by 2030 to experience the same expansion.
    Just from eyeballing that graph it looks like the US needs to probably get to 20.

    To get to where we need to be is going to take some interesting tactics, but at the end of the day it basically means a lot of people are going to need to double their debt, and the banks are going to have to change their rules to allow this, or the government is going to have to facilitate it in some way.

  3. We’ve done the same for the past 5-6 years.
    Take out once off stuff, and cost of living rising, rising and not at the official inflation level either