DXY was poleaxed last might as Fed action soothed. The ECB must freaking out about the EUR:
The Australian dollar was universally smashed but jumped versus the USD:
Gold bounced:
Everything bounced:
But EM junk struggled:
Bonds were bid:
Except Aussie as the market concluded a lunatic RBA will be the laggard as usual:
Stocks began the first of many bear market rallies:
Data was actually OK. European PMIs held up:
The US ISM flopped higher:
“The February PMI® registered 50.1 percent, down 0.8 percentage point from the January reading of 50.9 percent. The New Orders Index registered 49.8 percent, a decrease of 2.2 percentage points from the January reading of 52 percent. The Production Index registered 50.3 percent, down 4 percentage points compared to the January reading of 54.3 percent. The Backlog of Orders Index registered 50.3 percent, an increase of 4.6 percentage points compared to the January reading of 45.7 percent. The Employment Index registered 46.9 percent, an increase of 0.3 percentage point from the January reading of 46.6 percent.
But the global PMI better captured the moment:
The relatively better than expect European data helped the EUR higher. But the key is still the unwinding carry trade which, perversly, has turned EUR into a crisis safe haven.
At least for now. As the crisis enters its next stage, with European and US shutdowns adding to the demand shock, and highly leveraged corporations begin to fall over, the financial shock may return the USD to its safe haven preminence.
Or not. We’ve balanced out our offshore cash holdings because we just don’t know.
Either way, we still expect material downside for the AUD against both as the virus arrives in Australia and shuts it down through winter.