Australian dollar rises on “blue wave” election

See the latest Australian dollar analysis here:

Macro Morning

DXY was soft last night:

Which had all of the usual effects with AUD, EM and commodities all posting gains:

Treasury yields were flat:

And the stock bubble returned:

Westpac has the wrap:

Event wrap

Once again, the lack of key data in the North Atlantic meant that markets awaited comments from policy makers and politicians. Central Bank speakers stressed their preparedness to use further easing tools if needed whilst comments on EU/UK post-Brexit talks remained cautiously optimistic.

Trump pulled out of the 2nd televised debate, after the decision was taken to make it a virtual event while polls suggested that Biden’s lead has widened further.

US weekly claims data provided little market direction. Initial claims at 840k were marginally above the Bloomberg average estimate but close to the median of continued wide ranges in estimates. The encouraging slip in continuous under 11mn (10.976mn, ave. est. 11.4mn) was more pronounced.

Germany’s August Current Account surplus was close to market estimates at EUR16.5bn (est. EUR 16.2bn) with both exports and imports rising more than anticipated. However, it had little market impact.

French daily COVID case count remained uncomfortably high at 18,129, but below yesterday’s over 19k. UK posted a lift in cases to 17,540 (a trebling in 2 weeks and up from yesterday’s 14k).
UK and France are again looking to increase restrictions.

Event Outlook

Australia: Housing finance approvals posted a strong rebound throughout June-July. Westpac expects this to falter in August under the weight of Victoria’s second lockdown (prior: 8.9%, market f/c: 1.0%, Westpac f/c -1.5%). Owner occupier finance (prior: 10.7%, Westpac f/c: -1.0%) and investor finance (prior: 3.5%, Westpac f/c: -3.0%) are both expected to deteriorate.

The half-yearly RBA Financial Stability Review will be released at 11:30 AEST.

US: Wholesale inventories growth has returned to positive territory, supported by durable goods restocking (prior and market f/c: 0.5%).

Price action was pushed around by the usual combination of stimulus balderdash. It’s not coming but the market likes to pretend that it is. Meanwhile, the recovery is sliding away:

  

And, the virus third wave is delicately poised:

But, Wall St is nothing if not flexible and it has now moved on to the positives of the “blue wave” election:

The problem is equity valuations make absolutely no sense. And while that remains the case the Australian dollar remains vulnerable.

David Llewellyn-Smith

Comments

      • Up. Trillions in new gubmint borrowing. The Fed can keep a lid on it for a while but at some point the dam wall will burst.

        The Fed’s balance sheet is already $7.2 trillion — it will blow through $10 trillion by the end of 2021.

        Back in 2010/2011 Fed officials were talking about normalising rates (5%) and shrinking the balance sheet back to pre-GFC levels i.e. $890 billion. What a croc. Never in a thousand years. Rates are going lower and the balance sheet higher. For ever.

          • I was implying that you have been wrong for at least 5 years regarding the direction of bond yields.

          • I have said that bond yields will go up because they have likely bottomed — but the bottoming (topping) is a process and can be lengthy, as with all trend changes. It is after all a 40yr bull market that is coming to an end. Bit like a Supertanker doing a U-turn.

            The Fed, as I said 10 years ago will never normalise rates (true, they tried, but failed) and that their balance sheet would group in perpetuity (they even tried to shrink it – lasted about 5 minutes before they reversed course). Relax Andrew, all going according to plan. If you want a prediction as to what yields will do next week, I have no idea.

          • Then their balance sheet will expand at a much more rapid rate and the end of the Dollar will come sooner. When something is happening at glacial pace, nobody takes much notice. When something starts happening rapidly, people start to panic.

            Japan is not the template for a number of good reasons. I don’t know why people keep saying: “Oh, but Japan have done this that and the other.” But they do.

    • “If biden win”? I thought you and the other braindead righties said there was no chance of that?

      • On the contrary, I said Trump was toasted, and that s unfortunate.Scommo better be really nice and apologetic to our chinese masters now.

          • The whole Biden team is the old Obama’s free trade whith China/export of manufacturing/Wall street buddies.The most powerful business lobbies are full on behind Biden and Dems (for the Chambers, they hate Trump anti-globalization stance).with the Harris administration, China will have free reign over the Pacific (by the way during Pence/Harris debates, China censored Pence’s comments on China. Signal returned when Harris began talking again.)

    • Less Woke More BlokeMEMBER

      BLOKE!

      You need a cuddle, and no, that’s not woke, it’s BLOKE!

      I’ll also take your bet.

      Please define “end of Western Civilisation” so I am sure I have the parameters correct.

    • No so much, it mostly to refuge of the contrarian indicators/always wrong people, some happen to prefer Trump

    • You clearly haven’t lurked here long enough. If you took an average, the blog members are left of centre IMO.

      But if it’s a Progressive echo chamber you’re after, yeah, I’d fvck off somewhere else.

  1. come to conclusion doesn’t much matter who wins/ loses. US divide has cracked and as pandora said …

    maybe a war will help bring unity back to US of A