Australian dollar bashed as virus guts America

See the latest Australian dollar analysis here:

Macro Morning

DXY was flat last night as EUR lifted:

The Australian dollar was bashed anyway:

Gold firmed but looks vulnerable:

Oil fell:

And metals:

Plus miners:

EM stocks were hit:

Junk too:

As the Treasury back-up reversed:

Stocks fell too:

Westpac has the wrap:

Event Wrap

US CPI inflation was flat in October (vs +0.1% expected), for an annual pace of 1.2%. The ex-food and energy measure was also flat (vs +0.2% expected), for an annual pace of 1.6%. Tension remains between supportive supply constraints and dampening demand shocks. Weekly initial jobless claims fell from 757k to 709k *vs 731k expected). Continuing claims also fell, from 7222k to 6786k, dipping below 7m for the first time since 20 March.

The U.S. recorded 152,255 new Covid infections on Wednesday, with early epicenter New York ordering activity restrictions. Fatalities reached their highest point since May, and hospitalizations climbed by more than 10% in five days across six states. Covid won’t be a “pandemic a lot longer” thanks to rapid progress in vaccine development, according to Anthony Fauci, the top U.S. infectious disease official. The coronavirus could nonetheless remain endemic for a long time, he said.

Bloomberg reported that the Trump administration is stepping back from negotiations on a new stimulus package, leaving it to Senate Majority Leader McConnell to revive the stalled talks with House Speaker  Pelosi. McConnell’s position on stimulus has been even further from the Democrats’ $2.4 trillion proposal than that of Treasury Secretary Steven Mnuchin, who had been lead Republican negotiator, leaving low odds of a breakthrough before January. Pelosi and Senate Democratic leader Chuck Schumer reiterated their call for a large package.

Federal Reserve Chairman  Powell said at the ECB’s annual forum that it’s too soon to assess implications for the economic outlook, while warning that the next few months will be challenging.

Event Outlook

New Zealand: The October manufacturing PMI will be released, following four straight months in expansionary territory. Westpac expects the food price index to fall 0.4% in October, although annual price growth is currently running around 3%yr.

Euro Area: The September trade balance is due, and after finding a trough in April, the surplus has continued to widen. Following this, the 2nd estimate of Q3 GDP should confirm the 12.7% rebound from the advance reading.

US: With upstream price pressures still weak, the October PPI is expected to print at 0.2%. Finally, the November University of Michigan Consumer Sentiment Survey should hold around 82.0. The index has lagged the broader resurgence in activity.

El Trumpo‘s virus revenge is shaping up nicely. Virus cases are through the roof:

And deaths are launching:

Hospitalisations are now at all-time highs and intensive care admissions have exceeded the second wave:

Activity leading indicators are rolling but so far have been relatively steadfast:

But that’s the problem. False confidence about the virus is spreading it so it won’t stop until the economy does, whether by private or public lockdown.

And soon, there’ll be no more fiscal support with a disaster looming for the unemployed, via CR:

The first is the Pandemic Unemployment Assistance (PUA) Program. This is a special program that provides up to 39 weeks of benefits for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.

PUA is not payable for any week of unemployment ending after December 31, 2020. Accordingly, in states where the week of unemployment ends on a Saturday, the last week that PUA may be paid is the week ending December 26, 2020. For states where the week of unemployment ends on a Sunday, the last week that PUA is payable is the week ending December 27, 2020.As of October 24th – the most recent report – there were 9,433,127 receiving PUA benefits (there are questions about these numbers).

The second is the Pandemic Emergency Unemployment Compensation (PEUC) Program. This program “provides up to 13 additional weeks of benefits to individuals who have exhausted their regular unemployment compensation (UC) entitlement”. Just like the PUA, this program ends on December 26th. There are currently 4,143,389 people receiving these extended benefits, and this has been increasing sharply. On October 1st, about 1.8 million people were receiving benefits from the PEUC, so this has most than doubled over the last month as people exhaust their regular benefits.   This number will probably continued to increase over the next month.

Note that if people get laid off again, as COVID surges, many more people could exhaust their regular benefits.

So there is a significant fiscal cliff looming at the end of December.

El Trumpo is taking his revenge on the American people who refused to uphold his mighty person.

While it lasts the Australian dollar can only sicken right along with the American people.

David Llewellyn-Smith
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Comments

    • Mike Herman TroutMEMBER

      I read this morning that the Pfizer test results went something like this: 43,000 people given vaccine or placebo. 94 people fell ill with corona. 8 had the vaccine, the rest were in the placebo group… would like to know if that was true or not…

      • N sums it up, the vaccines are for the markets.
        the sharpest knives bailed on the news
        Took me a day to realise,
        Shirley by now the punters realise they are being led by the nose
        The Donald says he is gunna start up in opposition to fake media.
        Seems the murdoch mafia is very worried. Shares taking a hit.

        • In fact the sort of trap the possible vaccine represents is that the hope will enhance the propensity to lock down.Now if it is more drug company spin and come early next year there is no vaccine.Oh dear

          • FUDINTHENUDMEMBER

            Yeh saw the Pfizer chief sold heaps of stock on the press release. Sounds like typical shenanigans to pump the stock. Pfizer needed to get in ahead before others got first mover advantage on the news – ie. Subsequent announcements won’t generate as much inflows.

            Not saying the news isn’t positive. But with limited data, no peer review, and the fact that early vaccines don’t aim to stop Covid infection, only disease.. we ain’t getting back to “normal” in a hurry.

          • V451 from UQ looks promising to me……the only one I would take even to see my Mum & Dad…..there is a proprietary blob in it but it has a good track record with humans and the medical technologist in the family tells me these people are trustworthy.

      • 43K had one shot. About 39K of that group had a second shot. 94 cases of COVID among the trial participants.
        Data is sketchy but would appear the vast majority of infections are in the placebo group assuming a roughly 50:50 split between placebo and vaccine groups.
        Interim analysis is not unusual and better to have positive results at this stage than no difference.
        That said one can’t help but feel Dr Bourla the Pfizer CEO hit it very lucky with an announcement like this on the day he offloads $5million worth of his Pfizer shares. Admittedly the sale was flagged for this day some time ago but the timing is exquisite.

        • The detail provided seems so sketchy with the infections number overall crazy low. 94 infections out of 43k test participants? If you assume 50% were given the placebo and all 94 who got COVID were from the placebo group, you would still have to wonder how many of the entire group actually went outside for the trial period. ie was the entire group actually exposed to COVID for the trial.

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