Australian dollar now a golden rocket

See the latest Australian dollar analysis here:

NAB: Australian dollar to 80 cents

DXY is in one hell of a freefall now. Panic will be building in Europe as its fiscal stimulus has unleashed the currency:

The AUD is now a golden rocket:

Versus EMs as well:

Gold whooooosh:

Oil rolls on. Shale is going to restart. Stupid OPEC:

Dirt bounced:

Miners wow:

EM stocks are near breakout:

Junk is across it:

Even US yields lifted:

With stocks:

Westpac has the wrap:

Event Wrap

US chief medical advisor Fauci said that the final stage of Moderna’s COVID-19 vaccine trial was commencing and the earliest confirmation of effectiveness would be November.

White House officials and Republican party members agreed on the next US stimulus package. Discussion with Democrats is expected from Monday.

US June durable goods orders slightly beat the median estimate, although the core measure was slightly below. Headline of +7.3% (est. 7.0%) and ex transportation of +3.3% (est. 3.5%) were still well below pre-COVID levels. Dallas Fed July manufacturing survey rose further to -3 (median est. -4.8, prior -6.1). Gains in the employee (+3.1, prior -1.5) and average work week (+5.8, prior -4.3) components were encouraging but a pullback in expectations (+10.6, prior +19.7) reflected concerns over COVID-19 case count rises.

German July IFO survey rose to 90.5 (est. 89.3, prior 86.3) due to a solid gain in the expectations component to 97.0 (est. 93.4, prior 91.6).

Event Outlook

AustraliaWeekly payroll data exhibited a strong recovery initially as the Australian economy re-opened. However, these gains faded in the week ending 27 Jun.

US: The S&P/CS home price index is likely to show modest momentum in May (prior: 0.33%, market f/c: 0.3%). Conference Board consumer confidence is predicted to dip in July from 98.1 to 94.4 as sentiment sours on rising case count numbers. The market expects the recent uptrend in the July Richmond Fed activity index will lead to its first positive read since the onset of COVID-19 (prior: 0, market f/c: 5).

US fiscal was the big one for risk on.

The Australian dollar has pretty good trend relationship with gold though certainly not anything like one-to-one:

Gold makes up about 10% of the terms of trade. Very much dwarfed by the empty Chinese apartment commodities at 50%. But they tend to rally together these days anyway as the Fed goes through its various cyclical convulsions in tandem with Chinese empty apartment stimulus.

The gold rally will reinforce the AUD rally.

David Llewellyn-Smith

Comments

  1. GeordieMEMBER

    On a non-economic note, has anyone else noticed the parcel post system is utterly rogered at the moment? It’s taking up to several weeks to get small items from the east coast to Perth, sometimes being two to three times as long as it took to get from OS to Sydney.

    Glad we sold off our postal system for ?profit?

      • GeordieMEMBER

        Australia Post is a government-owned business, with the Australian Government as the only shareholder through the Minister for Communications and the Minister for Finance. It is governed under the Australian Postal Corporation Act 1989. Australia Post has the following general obligations:

        – To perform its functions as far as possible consistent with sound commercial practice.
        – Commercial obligations for sound commercial practice when possible.
        – Community service obligations (CSO).
        – Governmental obligations such as directions by the Minister, international conventions and government policies.

        The Australia Post Board and management are responsible for the day-to-day running of the organisation. Australia Post receives no funding from the government.

        I stand corrected!

      • GeordieMEMBER

        If you believe the tracking info, it seems items get stuck at a location, then shift to the next within 24 hours, then get stuck there for another week, even if it is just between handling centres in NSW. At a guess I’d say the system is completely overloaded and under-resourced and failing under the stress. Lack of domestic flights can’t be helping matters despite considerable effort by AustPost to gather more resources including freight charter flights.

        • Qantas just flew a perfectly good 747 to the desert.

          Surely we have someone capable of ripping the seats out and sticking in a conveyor belt in Australia?

          It doesn’t have to be perfect. Just some cages to keep it from shifting too far.

          • GeordieMEMBER

            Woah there, buddy! That’s way too innovative for this place, but I might know a French engineering company that has the skills and willingness to accept large cheques that will happily do the hard work for us.

    • Aust Post volumes have gone up massively due to Covid 19. The numbers are permanently higher than the usual pre Christmas rush levels. Add to this a lack of commercial flights which used to take some of the volume of small parcels and express post. Most of that is going by road and adding to the delays caused by the already increased volumes of road freight.
      They have also set up extra parcel sorting centres and distribution centres which seem to be causing major problems in some areas. We send parcels out of Sydney and about 20% of parcels don’t even get scanned at a sorting facility in Sydney. They just disappear for a week and then get scanned the day they are on board for delivery. I have visions of 1000’s of migrant workers tossing parcels around these new sorting centres. No time to setup anything high tech.
      All the Covid19 rules, outbreaks, facility closures, border closures, staff testing, quarantining etc. is also stuffing things up in some areas.

          • yeah that’s in the equities fund where they have to be 90+% invested or whatever… The growth funds done nothing and just treaded above water. Called the crash yes but have done very poorly lately while everything’s gone bonkers trying to be currency traders.

        • We’ve been clear on this. The forex holding has been an excellent hedge over the stretch. Yes, it’s worked against the rebound but it has proven much more valuable over the longer run.

          We’re rotating steadily into EUR as a larger portion of the hedge as conditions change.

          Stocks have gone nowhere for six weeks now and the rally remains very high risk. We’re in gold because it presents value.

          We do not invest for the quarter.

          • Problem is you preach that AUD is going higher here then do nothing in the portfolio and cancelled all gains. Agree with stocks are a bubble.

          • Haro, you miss the point. If stocks are a bubble then the forex hedge is prudent. Nobody knows when it pops.

            We’re nudging towards EUR now because it’s the safe haven dejour and will provide some upside for gold etc, as well as downside protection vs AUD if and when it does pop.

            Mdsee, the Rabo boys see it is as a bubble that will pop. I don’t know when it will pop but note that AUD also tumbles vs EUR when things really go shit.

            As for long term shortage, I agree. So MOAR from Fed inevitable!

        • Why adopt a gold standard? Precious metals are heavy to cart around, easy to steal,, relatively useless, expensive to guard. Why not peg the fiat AUD$ to a fixed quantity of standard house bricks FOB at the kiln. Few people would actually convert, but the peg would be an anchor.

          • Cos paper is easy to steal, relatively useless, easily destroyed and can be printed/made into oblivion. Same applies to bricks.

            Gold has been used as a currency for 5,000 years, can be minted wafer thin (and light), can be formed and reformed, combined with other metals, and is a finite resource which can’t be easily counterfeited etc. All the old arguments that are still valid today – mainly that it’s a recognised store of wealth outside the banking system.

            Bricks, nah.

            In any case, it looks like fiat currencies are on the way out which was always going to happen, hence the ECBs planning for 50 years to return to a gold standard.

            So by all means store bricks, but I think it wiser to follow a 5,000 year trend which it seems is also the CBs thinking.

            Get with the trend bro 😊

      • You’d better check again. We’ve got oodles of gold equities.

        As for stuff we rubbish, sure, but we have limits to how far we can move from index weights. This is for your protection in case we’re wrong sometimes, which we will be of course.

        MB Fund is not a hedge fund!

        • Thanks for replying.

          Perhaps you mean these?

          RIO RIO TINTO LIMITED FPO
          EVN EVOLUTION MINING LIMITED FPO
          NCM NEWCREST MINING LIMITED FPO
          NST NORTHERN STAR RESOURCES LTD FPO

          I’m fairly sure I can rule out the rest

  2. Aussies Can't Socially Distance

    Chinese economy back to normal. Remarkable when the entire western world is being ravaged by the virus despite getting a one month head start on the virus back in February.

    Aussie dollar going to keep getting stronger and stronger.

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