Australia dollar opens trap door to recession

See the latest Australian dollar analysis here:

Australian dollar plunges toward two year low before RBA hike

DXY was all over the place last night:

AUD was weak and wants to test the recent lows:

Oil broke:

Metals too. Copper took out critical support:

Miners are in free fall:

EM stocks are right at the cliff’s edge:

The message from junk is unchanged: sell:

As oil fell, Treasuries got a bid:

Stocks tried but failed to bounce:

Westpac has the wrap:

Event Wrap

Fed Chair Powell’s semi-annual Congressional testimony referenced a possible peaking in inflationary pressures while also affirming the Fed’s intent to act against inflation. The challenge was to achieve a soft landing. He said there were signs that activity was slowing and labour market tightness was easing in response to their actions. The funds rate will probably be above 3% by year-end, and they would need to see evidence of inflation slowing before contemplating a change of course.

Eurozone consumer confidence failed to stabilise fell to -23.6 (est. -20.5, prior -21.2) and remains at risk of breaching the pandemic record low of -24.4.

UK inflation data was close to estimates. CPI in May rose 0.7%m/m and 9.1%y/y (a 40-year high), as expected, but core inflation fell to 5.9%y/y (est. 6.0%y/y, prior 6.2%y/y).

Canadian CPI in May rose 1.4%m/m and 7.7%y/y (est. 1.0%m/m and 7.3%y/y) – the highest since 1983., with the average of core measures rising to 4.7%y/y.

Event Outlook

NZ: The Westpac-MM employment confidence index should receive support from strong job vacancies in Q2; evidence of higher pay is also of interest.

Japan: The easing of health restrictions should buoy the Nikkei services PMI in June; however, the lack of Chinese demand and supply issues are risks to the Nikkei manufacturing PMI.

Eur/UK: Ongoing cost pressures and supply chain issues are key concerns to European manufacturing and services in the June S&P Global PMI report (market f/c: 53.8 and 55.5). The UK’s S&P Global PMIs are facing similar risks and a sharp slowdown in activity is on its way (market f/c: 53.6 and 52.9).

US: The US are weathering similar headwinds, but prices pressures are also an ongoing risk to the S&P Global manufacturing and services PMIs (market f/c: 56.0 and 53.5). Meanwhile, initial jobless claims are set to remain at a low level (market f/c: 226k) and the Kansas City Fed index should reflect a positive but fragile manufacturing outlook (market f/c: 15). FOMC Chair Powell will deliver a semi-annual monetary policy testimony before the House Financial Services Committee.

The Fed is now winning its battle with oil which is great news for everybody except a few dictators. Global recession is now being priced into most commodities as well as the Johnny-come-latelies of commodity trading learn the lesson that it is always up the escalator and down the lift with dirt.

The US economy is beginning to fray. The European economy is already unraveling. China cannot save, either, especially since it will be hit harder than anybody else as the US consumer buckles.

Inflation is still far too high for Fed comfort and, if it’s got any brains, it will want to see oil much lower before it pivots. I’m talking $60 given the moment that it turns, oil will take off again.

Global recession and lower AUD still ahead.

Houses and Holes

Comments

  1. They are up to every trick in the book…..on the same day Mr Biden spruiks the Gas tax holiday strongly they conveniently delay the publishing of the EIA weekly oil report……no doubt hitting the futures market at the same time.

    https://twitter.com/JavierBlas/status/1539712552002895872

    I am wondering how the salt caverns are holding up dropping the SPR so quickly

    https://twitter.com/spriteer_774400/status/1539521338775425024

    December 2022 Eurodollar futures finally inverted…….they have a good predictive record

    https://twitter.com/JeffSnider_AIP/status/1539648855167614976

    • ErmingtonPlumbingMEMBER

      The New York Mafia might Anoint him the Godfather of Australia.
      He’ll probably return more powerful than ever!
      When Jordan Shanks reports waking up next to a horses chopped off head we will know that John who likes to licks Ascension to Aussie Godfather has occurred

      • MathiasMEMBER

        > The New York Mafia might Anoint him the Godfather of Australia.

        Australia wont have any money soon. Woolworths is already putting out notice that they might be running out of veggies in 4 weeks. A lot of the shelves are starting to get empty.

        I think getting rid of the corrupt is a bit like getting rid of a snake in your house. Just get rid of the food and sooner or later, they’ll slither out on there own and bugger off somewhere else eventually. If we remove the money, half these idiots will abandon us and be gone. They have no loyalty to this country, the people of Australia or anyone. The only loyalty these idiots have is to the money they can suck out of us and first chance they get, they’ll be gone. Just like the Romans and the Goths… but thats another story.

        Its day time. I’ve made my nights forex money. Its time to go wage war in the sunshine. Gotta go put the solar panels out to recharge the batterys and figure out how to keep them bloody birds from pecking at my tomatoes. They have one little peck and it ruins my entire tomato. I could have eaten or preserved that tomato but now its rotten. I swear, its the story of my life man. Bloody birds, I swear. I have a slingshot which I’ve been using to hit the bstards with in the day time but I’ve decided its time for a more permanent solution. This means war. I wont let these birds get the better of me. Forex by night. Avid bird killer by day. Gotta keep the birds off me tomato’s. Its a life.

  2. Massive deflation is coming, going to be a depression for the ages if the Fed and govs fvck this one up.

    This is why we’ll soon have massive inflation though, because the authorities will all overreact in a massive way reverse the deflationary forces. Covid will like a blip after this.

  3. Martin Armstrongs computer projects the collapse of economic confidence in the west before ten years is up way down to 1982 level. The west is stuffed by bad govt decisions imo.
    Oh for refunding CSIRO, secondly a govt guaranteed Post Office bank which will lend to manufacturing and jobs and protect our deposits and thirdly sorting the energy situation supplying domestically at cost plus. CSIRO likely can put industry innovations in a flash it’s been starved forever or it’s genius results sold off cheap to China ..like the Chinese textile revolution back 3 decades for one. Banks are lending for housing. And energy costs close industry as is happening bigly in uk and eu and stuffs people already mortgaged or rentalled out.

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