Australian dollar hits new highs as king dollar swoons

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DXY is at new lows and EUR new highs:

We all know what that means for the Australian dollar:

Gold was bid again but couldn’t hold:

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WTI is closing on Brent:

Base metals were strong:

Miners firm:

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But EM stocks fell:

And junk:

US yields faded the Fed:

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Thre Nasdaq blowoff continues:

Westpac has the data wrap:

Event Wrap

The Dallas Fed manufacturing activity survey rose from -3.0 to +8.0 in August (vs 0.0 expected).

Germany’s CPI inflation rate fell 0.1% in August (vs 0.0% expected, -0.5% prior), for an annual pace of 0.0%.

A plan to sell the US operations of TikTok was thrown into jeopardy after China asserted authority over a deal already under scrutiny by the Trump administration. China’s commerce ministry added speech and text recognition and personalised recommendations to a list of products that require approval before they’re sold overseas.

Event Outlook

Australia: It’s a busy day on the event calendar. The Covid shock will continue to filter through slowly to house prices, the August CoreLogic home value index expected to fall 0.6% after a 0.8% decline in July. Dwelling approvals slumped in H1; Westpac and the market expect momentum to improve on a HomeBuilder boost in July (prior: -4.9%, market f/c: -1.0%, Westpac: 3%). Westpac expects net exports to add 1.2ppts in Q2 as imports fall faster than exports. The trade surplus will contribute to a move higher in the current account balance (prior: $8.4bn, market and Westpac f/c: $13.0bn). Westpac expects brisk growth in public demand to continue in Q2, gaining 1.5%. The RBA is expected to remain on hold and highlight uncertainties over the outlook.

NZ: July building permits are expected to see a pullback in multi-unit consents after June’s large increase (prior: 0.5%, Westpac f/c: -10.0%).

China: The Caixin PMI will contribute to the run of positive manufacturing data (prior: 52.8. market f/c: 52.5).

AsiaMarkit manufacturing PMIs will also be released for Malaysia, Indonesia, Korea, Taiwan and India.

Eurozone: The August Markit manufacturing PMI will confirm production is improving (final estimate: 51.7). Job loss concerns are however mounting as government support begins to drop off; the unemployment rate is expected to lift from 7.8% to 8.0% in July. Inflation is expected to rise slightly from -0.4% to 0.0% in August.

US: Growth in output and new orders will be reflected in the August Markit manufacturing PMI read (final estimate: 53.6). ISM manufacturing should lift slightly from 54.2 to 54.5 in August. Construction spending is set to jump in July as the sector begins to recover (prior: -0.7%, market f/c: 1.1%). FOMC’s Brainard will speak on the New Monetary Policy Framework (03:00AEST).

There’s not much more to add today. DXY is falling with fakeflation and the hopeless RBA has strapped the Australian dollar to a rocket that gets further and further from its underlying economy. With the meeting today, what expect more stupid can we expect?

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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.