Australian dollar smashed again

See the latest Australian dollar analysis here:

Bitcoin heads for infinity

DXY is up and away as EUR sinks:

The Australians dollar was hammered:

Gold is close to a major technical break:

Oil is already through the same:

Metals fell:

Miners bounced:

EM stocks too:

Junk was OK:

Treasuries were flogged:

Stock pain is forgotten:

Westpac has the wrap:

Event Wrap

US 3Q GDP rose +33.1% (qtly, annualised) – a record rise and slightly above the +32.0% median expectation (prior -31.4%). Personal consumption was notably strong at +40.8% (est. +38.9%, prior -33.2%). Although growth is expected to continue in 4Q, the rise of Covid infections in US and globally, and the current profile from 3Q, still leaves activity 3.5% below its peak. Initial jobless claims grew 751k (est. 770k, prior revised to 791k from 787k), with continuing claims pulling back to 7,756k (est. 7,775k, prior revised to 8.465k from 8.373mn). Sep. pending home sales faltered for the first time in five months, falling 2/2%m/m (est. +3.0%m/m), though still rising +21.9%y/y (est. +23.0%y/y, prior 20.6%y/y).

The ECB left policy on hold while clearly indicating that they would respond to increasing downside risks with further accommodation in December. Asset purchases programmes (including their EUR1.35tr PEPP) were left unchanged, as were LTLRO III targeted funding facilities. It said it would “recalibrate its instruments” once it received December staff macroeconomic projections.  While the ECB was widely expected to open the door for a December easing, this was a more explicit preparatory statement. The press conference added emphasis, with Lagarde saying the economy was already losing momentum after its summer activity rebound and is now facing deeper downside risks.

Event Outlook

Australia: Private sector credit is contracting and there is prospect for further falls as Covid’s economic shock reduces the appetite for debt. Westpac expects the weakness in business and personal credit to continue, whilst housing credit grows modestly (total private credit: market f/c: 0.1%; Westpac f/c: -0.1%). The Q3 PPI will follow; higher fuel costs are expected to be offset by a stronger AUD and soft demand (prior: -1.2%). Also, the result of the 2019-20 annual re-benchmarking of the national accounts will be released.

NZ: ANZ consumer confidence should reflect lingering uncertainty for NZ households (prior: 100).

Japan: Lower food and energy prices are expected to weigh on the Oct CPI (prior: 0.2%/yr, market f/c: -0.2%/yr).

Euro Area: GDP had its largest contraction on record of -11.8% in Q2. The unwinding of strict containment measures in May and June point to a rebound in Q3 (market f/c: +9.6%, Westpac f/c: +9.0%). But, with cases surging once again, risks are to the downside for both Oct’s CPI (prior and market f/c: 0.1%) and Sep unemployment (prior: 8.1%, market f/c: 8.3%).

US: Personal income growth should flatten at an expected 0.3% as unemployment aid rolls off, whilst personal spending continues to be supported by food and healthcare spending (prior and market f/c: 0.1%). The Q3 employment cost index is likely to reflect substantial labour market slack, with wage growth expected to moderate to 0.5%. Elevated virus counts and a lack of fiscal relief will challenge the recovery in Uni of Michigan sentiment too(prior and market f/c: 81.2).

The virus marches higher across the North Atlantic:

It’s an absolute mess of signals. The Treasury curve wants to steepen into a “blue wave” election recovery and inflation even as oil plummets. But DXY is rising strongly, the classic risk-off signal and obviously bearish for inflation everywhere. Equities can’t decide, either way.

Much of the confusion is related to the election. Yesterday’s polling and court action over mail-in ballots were bad for Trump so the market lifted on the hope of an uncontested result. But the risk of Joe Biden is also more lockdowns, doubtless of the “lite” variety, but bad for activity nonetheless. Economic signals are softening but not terrible:

Then there’s the senate and stimulus to worry about, as well as still hugely over-priced stocks.

In short, it’s a mess and Australian dollar falls are reflecting that.

David Llewellyn-Smith
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Comments

    • truthisfashionable

      “The Fed has some credit facilities that expire Dec. 31. If there is a change of power my concern I see a risk of those not being extended…You are talking about money not getting to people until after Valentines Day…”

      Does anyone know if they mean money to actual people or money to ‘the people that matter’ like wall street?

  1. – As long as the price of all imported stuff is falling at (about) the same rate our Peso is falling, I don’t worry too much.

    • RBA pushing on a string, indeed. Perhaps not so much, what are our foreign reserves looking like?

      • All central banks are finished
        Powell Put has gone
        QE is doing nothing
        1 RBA is pushing on a string
        QE won’t do anything here
        Long term interest rates are going to rise next year
        2021 we start the reversal of the 30 year bond bull market
        As we head into the deflationary bust, credit risk is going to drive rates higher

        Home prices in all rhe major cities in the world have already started their decline and will accelerate as interest rates rise, then falling home prices will spread outwards to everywhere

        But the big one woohoooo, AAA fixed income portfolios, the big boys PIMCO etc they are going to be wiped to be oblivion

        We have now started the multi year global bond bear market

        Wowhhhoooo is that going to be ugly

        Remember what really causes major depressions not a share market crash, 1929 stock market crash wasn’t the end of the world it was in 1931 when CREDIT ANSTALT owned by Rothschild defaulted triggering sovereign bond defaults around the world

        ALL THE REAL WEALTH IN THE WORLD 🌎 IS IN THE BOND & PROPERTY MARKET

        Work that % out ??? Guessing it’s huge in comparison to the sharemarkets

        None is this money is ever going to be repaid, Europe trillions Vic Government 50 billion Aust Gov will be a trillion US Trillions

        Governments state governments are going to eventually default everywhere, there ain’t no money to repay all this debt, you don’t have to be a PHD economist to see that

        We are headed in the worst depression worse than the 1930s Great Depression and 1870s Long Depression

        Interest rates unfortunately to disappoint the “interest rates low:for ever club” and “property prices boom ahead” are going to be very disappointed next years

        It’s all going io end in 😭

        • Is the logic for interest rate rises based on a preliminary destruction of capital. I don’t disagree but I just would like to understand how the mechanics of this would play out.

          Welcome back

          • From a technical perspective the 40yr bond bull market has been forming a ‘topping’ pattern for some time i.e. a bear market (rising yields) is next on the menu.
            From a fundamental perspective, as the amount of debt increases so yields should increase – a basic economic relationship. Now with Govts running huge deficits and zero prospect of a balanced budget this side of 2030 the debt mountain is just going to balloon from here.
            The only way yields won’t rise from here (talk of deflation is utter nonsense) is if Central Banks keep yields suppressed – and the only way they can do that is by printing the money to buy all surplus bonds. And this is why people like me see a fiat conflagration as inevitable.

          • Yeh….. central bankers will be nowhere to be seen, they’ll all be diving under their pillow soon

        • @dom
          Ok so you are right on CB printing
          Something has to give
          Fiat will be worthless

          Guess it’s why gold has been rising

      • Pessimist with all my faults, I can see the future, my GF lives in the present and gets frustrated, she only wants to know what’s happening today

        People who live in the moment and really walk around oblivious to what’s ahead are much happier

        I really wish I was more like that

        Look concerns ahead, that we need to prepare for, this CV19 isn’t that deadly (true & fact) but it’s going to keep mutating over the next few years and the disease virus is not going away, it’s going to end up really being as deadly as the Spanish flu. I’m looking around now for small towns re remote in a warmer dryer locations to move to. Disease is going to wipe out a huge amount of the population. I’m not cheering about this but I’m preparing
        Forget about houses and house prices noone will give a sxtt about where they live when the worry is about serious disease and food shortages over next 5 years
        A friend of mine is very senior at a large food corporation he says you have to worry about water shortages,now I don’t understand that one
        We are already seeing serious civil unrest everywhere which will keep rising ahd eventually global war …… feels to be China and US will lock horns
        2020s will be a decade of disease famine war, inflation (food shortages) higher interest rates

        I’m trying to find the best remote place to prepare to move

        Sorry to sound pessimistic you can’t party 🎉 like it’s 1999 and not have the hangover

        • Dry heat
          Need good internet connection
          Need a couple of good cafes
          Couple of good restaurants
          On a river
          Train or decent road into a major city

          A very close friend is who preparing too is moving to just outside of Rockhampton
          Has a few good private schools
          Good river
          Good access to food
          Drive to Whitsundays
          Good airport
          Can drive to Bris fair way but it’s ok

          Just looks to hot in summer

          Houses are very cheap,nearly free

        • If “a huge amount of the population” is going to be wiped out by this virus with a fairly modest CFR, why do we need to worry about food shortages?

          • Global warming is going to affect growing
            Serious supply chain disruptions
            Movement between borders will be tighter states countries
            War
            Depression

            Look back at history

            Watch Angela’s Ashes

            Very sad but these things happen in depressions

            I actually said last year famine and disease were the main worry

            All my comments are on this site from 2019

        • Goldstandard1MEMBER

          Hey Bnich, as always you are more pessimistic than me but what I don’t get about ppl is loading up (high risk) on everything being ok and boom times. I could never put my family at risk like that – I mean blind freddy can see things are EXTREMELY volitile at the moment and I have mates loading up on debt and stocks.

          I am heavy cash, in some tech shares but also have my old man caretaking a property in Bendigo for me in case things really go pear shaped. I just don’t understand people thinking things will absolutely be back to the good old days. The odds are surely things are going to be worse than they have been. Anyway, I guess that’s why some people risk everything and end up loaded or bust.

          My next challenge is how to protect the super account.

          • Just get a history book out and look at how the roaring 20s turned into 1930s

            Things seem to repeat

            We have had the roaring 20s now we are in 1929/1930

            1929 sharemarket crash, 6 month rally 2 year bear market then 1931 debt defaults and war

            Have a look at the booze and food being drunk in 1920s compared to 30s

            My friend who is very senior at a public global food company says we have excess food in AUST, we couldn’t eat what we have….that’s a positive

            I think it’s less likely very remote locations will be bombed in war, and safer with disease

            Still worth stocking up on food too

            Your mates will be living in your lounge room and sitting at your dinner table

          • @GS1

            If people haven’t worked out from this CV crisis that health safety happiness low stress etc etc are the only thing that matters
            The lesson is going to be even more difficult

            Everyone who lives in excess, too much debt, high risk, etc etc will be wiped out completely

            I’m sorry but it’ll be the soup van

            But you can’t even stand at the soup van now

            What a disaster

    • Imported stuff (priced in USDs) is rising and therefore stuff is getting more expensive, not less. And if the poo is falling, it’s getting even more expensive. Even shipping rates are far higher right now than they were just 18 months ago.

      • Inflation we haven’t had for a very long time
        The younger ones under 40 haven’t lived in high unemployment high inflation higher interest rates like the 80s

        Honestly it’s really fcked

  2. Rorke's DriftMEMBER

    Im building a big position in BBUS, the leveraged sp500 bear ETF. Stocks have come off a bit and come my way last few days. Im expecting a bounce on Trumps win, but then will go all in for a sharemarket collapse from year end for a medium term hold.
    Also looking to put some cash into the Perth mint cash account to get it out of the banking system. Not prepsred to put it overseas with travel restrictions in place possibly long term.