Australian dollar smashed as US fiscal dies

See the latest Australian dollar analysis here:

Macro Afternoon

DXY was strong last night:

The Australian dollar was smashed on the deflationary budget and then US fiscal death:

Gold was hit:

Oil is stupid:

Metals were mixed:

Miners clubbed:

EM stalled:

Junk rolled:

With yields:

Stocks fell sharply late:

As the news hit, via Bloomie:

President Donald Trump told his negotiators to stop talks with Democratic leaders on a fiscal stimulus package, hours after Federal Reserve Chair Jerome Powell’s strongest call yet for greater spending to shore up the economic recovery.

“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,” Trump said Tuesday in a tweet.

No surprise to me or readers. It’s been clear for a few weeks that the GOP has decided El Trumpo is done for. Now we have the truth as they cut him clean off at the waste. This is just El Trumpo trying to appear that he is in control.

And after he risked his life to come out of hospital far too early as well! The Great Narcissist will not be happy as Mitch McConnell takes his revenge served stone cold.

So, Wall St spruikers are still trying to put their best spin on it:

That is hogwash. The US will now flirt with a new year double-dip recession. Even if it gets through that with some lousy growth, Captial Economics is far more realistic about the trajectory of recovery:

As this:

And this:

And a reversal of this:

Means a stronger DXY as the global recovery is shocked as well. Not helped by the alarming European second wave:

Which is already killing activity:

Add the immensely deflationary budget and the Australian dollar is in all sorts of trouble short term. Indeed, there is now a rising chance that its post-COVID rebound is cooked longer term as well, depending upon how quickly Frydenberg’s deflationary shock budget liquifies the RBA glacier.

Either way, the Australian dollar bull market is running out of puff fast.

David Llewellyn-Smith

Comments

  1. happy valleyMEMBER

    “Either way, the Australian dollar bull market is running out of puff fast.”

    Must have got infected with ScoVID-19, but remember it’s less worrying than normal flu – the mighty Donald has spoken.

    • The Traveling Wilbur

      If it has got the 19, does that mean it only has a 2-4% chance of dying? Better odds than MB usually assigns it!

  2. All short-term impacts. There’s a tidal wave of stimulus coming whomever wins in November. And if Biden wins, it’s going to be epic. That’s when the next leg of the gold bull gets going.

    As for Straya, they’ll come to the party eventually, like it or not.

    • Absolutely. This is all noise, when the election happens (and it doesn’t matter who wins) the stimulus will flow. The next month is the time to start buying in if you haven’t already done so.

      • Wouldn’t assume that for one. Republican Senate Biden President could see much less stimulus than other scenarios. Conservative Supreme Court could gun down more ambitious plans if some influential person challenges. And it’s not like Bernie Sanders will be President. Biden doesn’t really care, neither does Pelosi. Their priority is to bail out blue states/cities, it isn’t to save the world.

        Second, it would be priced in anyway. Everyone knows there’s going to be “a lot of stimulus”.

        • In any normal situation I might agree but the economies of the West are now fully addicted to stimulus and cannot go ahead without it. And like any addict they need increasingly more just to sustain the current ‘level’. It will never end.

          • I can’t agree that stimulus will necessarily come like a tidal wave because the elites really don’t give a stuff about us or even the future of our countries. The Libs are already cutting stimulus and COVID is nowhere near over. If Democrats can find an excuse, such as a Republican Senate, they’ll curtail it as well. The EU might see considerably more stimulus since that seems to be more in their political culture.

            It reminds me of the Rainbow Coalition taking power in South Africa… everyone thought they were heading towards a bright future of social justice, but it turned out that the corrupt ANC elites were mostly interested in themselves.

        • With respect, comparisons with the Rainbow Nation are not valid. SA is just another African basket case. The elites plunder because there is so little real substance to most of those economies. Our elites plunder in a different way – they use economic substance to underpin excessive printing press activities which can be used to buy votes and buy lucrative post-politics jobs. More sophisticated, less vulgar but every bit as corrupt.

          Stimulus is coming or housing markets and stock portfolios will crater. And pollies won’t accept that.

          • Maybe the portfolios won’t tank. There’s nothing more bullish for shares and property than deflation. We’ve seen that since the GFC. Inflation is the real boogieman, markets did terribly during the time of inflation. Low stimulus means serious deflation.

    • If Trump wins it is a $1.6 Trillion stimulus, if Biden wins its $2.5 Trillion – either way that is so far beyond reasonable for any US bond / treasury holder and they will dump – China already is – others will follow suit as it completely de-legitimizes the system.

      Democrats have talked up BIGLY on open borders, migrants, BLM and their anti Trump trade war – their only real option to save face is open the borders, mass migration, provide citizenship to tens of millions of migrants and bailout every blue state in the country.

      Democrats are known well to be the face of the military industrial banking complex, republicans aren’t far behind, and will be chomping at the bit after Trumps global de-escalation.

      Dollar will succumb early 2021, wars will commence shortly thereafter – Europe will have had enough and again pivot east leaving England allied to the US as Wales, Ireland, Scotland all re-join the EU.

    • Mining BoganMEMBER

      Niko must be doing quite well of late. Probably now in the position to buy the MacroBusiness Sydney-To-Hobart yacht…if the race is still on that is. Hey, if the boat breaks and you have to be towed into Victoria somewhere will the crews have to be thrown into quarantine?

      • darklydrawlMEMBER

        Depends on their net worth and federal connections. If they are povo and relative nobodies – than ‘yes’. Otherwise they are cleared to take a lazy trip up the east coast until arriving in SE Qld for some good ol R&R.

  3. innocent bystanderMEMBER

    if I take a simplistic view of Exhibit 6, deaths aren’t rising like in Wave-1.
    this could end being the World learns to live with it and economies restart – and with all that stimulus sloshing around looking for somewhere to go.