Australian dollar hits new highs as fakeflation delivers US jobs boom

DXY rebounded a little Friday night:

The Australian dollar is a one-way melt-up machine:

EMs were mixed:

Gold was whacked:

Oil poured it on:

Even dirt joined the party:

Miners roared:

EM stocks are the gapping wonder of the world:

As the virus rips the EM universe apart, its riskiest debt is on fire:

The bond back-up is underway:

As stocks head for wall-to-wall new highs:

The US jobs report was much better than feared:

Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported today. These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it. In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade. By contrast, employment in government continued to decline sharply.

…The change in total nonfarm payroll employment for March was revised down by 492,000, from -881,000 to -1.4 million, and the change for April was revised down by 150,000, from -20.5 million to -20.7 million. With these revisions, employment in March and April combined was 642,000 lower than previously reported.

None of this data can be trusted, Calculated Risk:

The May employment report was surprising. Every key indicator – ISM surveys, ADP employment report, unemployment claims and more – suggested further job losses in May. Instead the BLS reported job gains of 2.5 million (about 10 million better than consensus forecasts), and the unemployment rate decreased to 13.3%.

The reference week in May (includes the 12th) was too soon to be impacted by most areas “reopening”. One possibility is that many companies brought back employees to qualify for the PPP (Payroll Protection Plan).

In April, the year-over-year employment change was minus 17.7 million jobs.

One of the keys to follow will be the number of workers on temporary layoff. This increased from 801 thousand in February, to 1.848 million in March, and to 18.063 million in April. This decreased by 2.7 million in May to 15.343 million. It could be that companies let too many workers go in April and brought some back – or this might be related to PPP adjustments.

The BLS itself said the unemployment was probably 16% not 13.3%.

But none of that matters to the Great Fakeflation. It is narrative, not data-driven. On that basis, I can’t see anything to really upset it until Q4. Q2 earnings can be written off as shutdown affected and so can all negative data. Obviously all new data will be better simply because economies are no longer shut, supporting the ecstatic narrative.

Meanwhile, the stimulus flows, and the robots accelerate through their fakeflation cycle that bears no relation to the underlying economy.

We are already at the second-highest stock valuations in history with no economy. With half an economy, why couldn’t we get to the highest? It could pop in six minutes or six months but it looks like one of the greatest stock bubbles of all time is inflating before our very eyes.

That will mean just one thing for the Australian dollar as the Great Fakeflation blows off:

And my chart:

The resulting hollowing out will be real but that’s a story for a lost world in which truth played a role.