Australian dollar rips new high as commodities riot

See the latest Australian dollar analysis here:

Macro Afternoon

The DXY smash resumed last night with EUR at new highs:

Australian dollar hit new highs versus USD but could not hold them:

It was strong against EMS:

Gold is at record highs again:

Oil broke out:

Dirt surged ex-copper:

Miners boomed:

EM stocks took off:

Junk not so much:

As oil spooked yields:

But stocks surged on:

Classic reflation trades as a Fed-debauched US dollar comes apart, capital flows out to the periphery and the monetary tailwind lifts commodity prices. Iron ore futures made it a complete set.

There is still the problem of there being no comparable economic recovery but, hey, it hasn’t stopped markets pricing the fakeflation cycle so far so why stop now?

The next test is the US jobs report on Friday which, if ADP is any guide (it isn’t), will be weak:

Private sector employment increased by 167,000 jobs from June to July according to the July ADP National Employment Report®. … The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.

“The labor market recovery slowed in the month of July,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We have seen the slowdown impact businesses across all sizes and sectors.”

Markets expected 1.2m. They expect 1.36m for non-farm payrolls.

If it is weak, then it’s a fair bet we’ll see more USD weakness and more fakeflation into the commodities complex.

Even if it strong it may continue on recovery hopes given the one-way pricing model the market has in its head.

David Llewellyn-Smith
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Comments

  1. Wework Is broke

    It’s not fakeflation. Debasement of currency causing price rises is the definition of inflation.

  2. Trump already said job report will be good. I’ve learnt to not fade Trump as ridiculous as he can be. So job report to be stronger than ADP indicates, maybe USD stronger then on that assumption but so far not many buyers.