DXY was firm again last night:
The Australian dollar is a v-shaped rocket ship:
Gold couldn’t keep it going:
Oil is still dreaming:
Dirt is hinting at recovery:
Miners too:
EM stocks are lagging:
Junk jumped:
Bonds were hosed:
As stocks looked across the gigantic abyss:
It’s all fixed, apparently. Societe General sees the Australian dollar as the number one currency play:
…after two years of fiscal surpluses and a current account surplus in recent quarters, the country (Australia) is in better shape to weather the current crisis than most
…given relative fundamentals and if markets are getting more orderly, this is a trade that should perform.
As China recovers.
True enough assuming the world and China do recover forthwith. The wildly volatile Aussie will bounce hard.
The question is is the world about to recover? We’re approaching peak virus in the economies that matter so the market is running hard on that. But that is not the same as economic recovery. We still haven’t seen any serious bankruptcies or banking stress which surely lies ahead given where we are in the credit cycle.
The US unemployment rate is about to spike. The St Louis Fed sees it 27% unemployment:
At astonishing speed:
Ditto Europe.
And a tsunami of defaults will land on the banks everywhere. Stress is still apparent in the global banking system:
It’s one thing to get a v-shaped recovery in a wildly volatile currency. Another entirely to see it in the real economy and for earnings as the default tsunami hits:
It still smells an awful lot like a bear market rally to me. If so, it’s the same for the Australian dollar.
