See the latest Australian dollar analysis here:
DXY resumed its bullish climb last night and EUR sank:
The AUD held its recent gains and now roaring versus the crosses:
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Oil is a rocket. The entire energy complex is:
Base metals are still struggling:
EM stocks are right at the cliff:
The EM junk siren is wailing:
As Treasuries back up:
Stocks managed a rebound but it’s far from convincing:
Westpac has the wrap:
US services ISM rose from 61.7 to 61.9 (59.9 expected), the seventh consecutive reading above 60 indicating a strong services sector.
FOMC member Evans agreed QE tapering could start this year and finish in mid-2022. He said the economy has made a lot of progress although the recovery remains uneven, and expects the inflation spike to eventually fade.
New Zealand: Westpac expects the RBNZ to lift the OCR by 25bps to 0.50% and to endorse the path of future rate hikes projected in its August Monetary Policy Statement (which is also in line with current market pricing).
Euro Area: August retail sales should rebound given healthy consumer confidence (market f/c: 0.8%).
US: ADP employment is expected to continue to lag payrolls in September (market f/c: 430k).
The other major news is that it appears the Dems are approaching agreement on their next infrastructure package around $2tr.
The AUD is roaring on the crosses because we are an energy exporter and the other major DMs are importers. The US is similar to us so I expect DXY to at least pace AUD if not outpace it as the energy shock saps global growth.
My view remains that China is headed into virtual recession if not already there which will short-circuit Europe in due course, the US is slowing fast, the Fed is going to do a pro-cyclical taper, the energy shock could not be worse timed even if it is short-term, and risk assets, including AUD, are at risk of deeper falls.