Australian dollar, stocks and virus rip

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DXY was down last night:

The Australian dollar blasted higher:

Gold was flogged early but recovered with stocks:

Oil too:

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Dirt was weak:

And miners:

EM stocks held on:

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As the Fed lifted junk with direct corporate bond purchases:

Bonds eased:

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Stocks were bashed then took off:

The Australian dollar remains a listed US equity:

Westpac has the wrap:

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Event Wrap

The US Federal Reserve said that on Tuesday it will begin buying corporate bonds under its Secondary Market Corporate Credit Facility, an emergency lending program that to date has purchased only exchange-traded funds.

FOMC members Daly and Kaplan both reiterated the highly accommodative mantra. Kaplan discussed the potential for yield curve control, while Daly promoted the potential for large infrastructure opportunities.

NY Fed Empire manufacturing survey rebounded to -0.2 (est. -30, prior -48.5). Future business conditions rose +27 to +56.5 – the highest in a decade, and future employment rose to +19. On current conditions, new orders rose to -0.6 from -42.4, with employment and hours worked still negative but edging firmer.

Eurozone April trade surplus fell to a mere EUR1.2bn (s. adj., prior +EUR25.5bn) as exports collapsed more severely than imports.

Event Outlook

Australia: The RBA’s June Board Meeting Minutes will be published. The market will be looking for any comments around the recent AUD surge and the expected timing of the recovery. Weekly payroll data to 30 May will provide further insights on the effect of restrictions on employment late in the month ahead of the May labour force report – due Thursday.

New Zealand: Westpac Q2 Consumer Confidence is likely to be mixed, given both the rapid lockdown and the faster-than-anticipated easing of restrictions occurred within the same quarter.

Europe: The June ZEW Survey of Expectations should be supportive of the recovery narrative given May’s strong rebound surpassed pre-COVID levels.

UK: The market expects the Apr ILO unemployment rate to jump, forecasting an increase to 4.7% from 3.9% in the month prior.

US: After a record contraction in April of -16.4%, the market predicts a comeback in spending, with May retail sales forecast to rise 7.4%. A similar trend is expected to be seen in business activity as industrial production ramps up (market f/c 3.0%m/m, prior -11.2%). The NAHB homebuilder confidence index is set to rise, with survey results placing June’s forecast at 43 from 37 in May when the index began to recover. FOMC Chair Powell (00:00 AEST) and Clarida (06:00 AEST) will speak.

Nothing new. Fakeflation having another crack. Where stocks will go next in the near term is anybody’s guess but there is now a bearish narrative to counter the bullish one so I’d expect a contest. Wherever it is the AUD will follow.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.