Australian dollar massacre to continue

See the latest Australian dollar analysis here:

Macro Afternoon

King Dollar is consolidating its recent run higher:

AUD was belted across the board:

Market positioning suggest plenty more room for downside:

Oil is having another crack, killing everything else:

Including metals:

And miners:

EM stocks are breaking:

So is junk:

As yields track oil:

Steamrolling stocks:

The big data release of the night was US jobs of course. TD has the wrap:

Payrolls rose a robust 428k in April, above the 380k consensus but closer to our slightly more optimistic 400k forecast. The unemployment rate stayed unchanged at 3.6%, as a result of the large decline in the employment series from the household survey combined with a retreat in the participation rate. Average hourly earnings slowed to 0.3% m/m after posting a solid 0.5% m/m advance in March.

•The April report continues to support the view that the labor market remains very solid, but that it is slowing at the margin. We think today’s report supports the Fed’s inclination to front-load interest rate hikes until it reaches a more neutral stance.

We expect the Committee to increase rates by 50bp in both June and July,and to deliver a 25bp hike at each meeting between September and March 2023.

You can expect that all you want, but I suspect markets will have long ago priced a recession before the Fed gets that far.

In the financialised economy, asset prices rule everything and the most important to US households is stock prices. As Fed hikes gut the stock market, the consumer will retrench and excess US inventories become a big problem for the supply side of the economy.

The subsequent drawdown will send a trade shock to Europe where domestic demand is already on its knees, and to China where domestic demand is curled up in a little ball under the bed.

Commodities, including oil, will crash.

The AUD has not bottomed.

Houses and Holes

Comments

  1. What’s MB thinking on Euro-Area debt crisis 2.0?

    Rates exploding higher, and ECB won’t be able to do all that it takes if they get into trouble… and EUR looks likely to test some big support levels soon… parity to break????

    • Italy is a risk. Very dependent on Russian gas as well. Spreads already widening v Germany.

      It’s possible. Base case though is global recession kills inflation before it metastases.

      Parity my base case in recession but then EUR roars as Fed buckles.

  2. BigBakaMEMBER

    Oh O! MB has unequivocally stated that AUD hasn’t bottomed. Given that there is an inverse relationship between MB currency projections and actual currency movements, it must be time to buy some AUD!

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