Australian dollar falls as Americans breath their last

See the latest Australian dollar analysis here:

Macro Morning

DXY was stable Friday night:

The Australian dollar fell a touch:

Oil and gold both rose:

Metals are off to the races:

Miners were firm:

EM stocks too:

Junk was fine:

Treasuries bid:

Stocks fell again:

The virus is still the story. In Europe it is now declining but has multiple weeks of lockdown to go:

In the US we have months of tightening ahead as cases continue to spread through a too open economy and deaths begin the grisly catch-up:

Plus, fast approaching is a fiscal cliff of immense proportions, from BofA:

• Many pandemic-aid programs in the CARES Act are set to expire at the end of the year without action from Congress.
• The expiration of federal UI programs—PUA and PEUC—alone could be a drag of 1.5pp in 1Q. Cutoff of other provisions will be additional headwinds.
• We expect Congress to pass another package of $500bn-$1tn in early 1Q which should offset the drag and support growth into 2Q.

Some charts. The cliff:

Just as the employment recovery stalls:

And more need the dole:

Let’s cut some other stuff too:

 

The impact will be big:

But, of course, this comes after:

I am still looking for short-term market weakness to get longer value and cyclicals for the recovery afterwards.

The same dynamic applies to the Australian dollar.

David Llewellyn-Smith
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Comments

  1. chuckmuscleMEMBER

    Best quote I’ve heard for a while “If I had a dollar for every time some one said this is the start of a value rotation, I’d be almost as rich as a growth investor”.
    Suspect we have one last big deflationary event catching all these value guys offside.

    And what’s there to recover from? Not like we have had the classic cycle washout that can lead to a virtuous private sector investment cycle.

  2. The WH has instructed the Treasury to by pass the FED and deal directly with both Houses. They also have taken back over 400 billion dollars they gave the FED in March. The way things are moving Treasury will be issuing currency by Jan.

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