Only the property crash can sink Australian dollar now

Advertisement

DXY rebounded last night but it was not convincing:

The Australian dollar fell but it wasn’t convincing, either:

Gold held the gains:

Advertisement

WTI popped:

Dirt was OK:

Miners too:

Advertisement

EM stocks are marking time:

Junk eased:

US yields rose!

Advertisement

As stocks went nuts:

The only chart that matters presented some AUD/SPX dislocation:

However, there is nothing to suggest that the currency reversed course owing to the swiftly deteriorating local outlook. It was driven by the DXY reversal.

Advertisement

How can that be? Pretty simple. Despite the local economy falling into a protracted depression, with no end in sight, and no clear strategy to exit it as the federation fights over how to address the virus, there will be no further monetary or fiscal easing.

With commodities to remain high, those two inputs are all that is left to drop the currency. And we have the two of the most out-of-touch macro managers in the world in Josh Depressionberg and Deflation Phil.

That means that, so far as our contribution is concerned, only an economy crushed flatter and deeper than elsewhere will deliver us a lower AUD.

Advertisement

It is coming when the housing crash gets moving but not yet.

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.