Australian dollar madness!

DXY was smashed Friday night:

AUD went nuts:

Tracking CNY:

The FX action sent commodities bananas:

Big miners were up 10%!

Em stocks popped:

Junk too:

The curve steepened:

Stocks firmed:

US jobs came in strong again is somewhat eased. Goldman:

Total nonfarm payroll employment increased by 261,000 in October, and the unemployment rate rose to 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in health care, professional and technical services, and manufacturing.

…The change in total nonfarm payroll employment for August was revised down by 23,000, from +315,000 to +292,000, and the change for September was revised up by 52,000, from +263,000 to +315,000. With these revisions, employment gains in August and September combined were 29,000 higher than previously reported.

The small rise in unemployment was enough to push the US dollar lower but the bigger factor is the crazed short-squeeze in Chinese and associated assets on hopes of a post-COVID reopening.

When global growth is stronger than US, DXY will fall all things equal, and a reopening of China lifts not just itself but Europe and EMs.

Is it coming? Inevitably. But not through Winter and it is likely to be slow and steady after that. China is not ready in terms of vaccine rates or health infrastructure.

In short, it could take most of 2023 to do it so it’s no answer to global growth.

Moreover, the market reaction is amusing for hopes of falling inflation and the Fed pivoting dovish: a falling DXY reflating EMs and S&P profits, oil and base metals breaking out, credit spreads contracting, stock markets booming and US import inflation surging.

This is the precise opposite of the what Fed wants to see as US inflation remains not just sticky but firming:

Of course, any hint of a falling DXY coupled with a rising China is going to do exactly what happened to the AUD, which is behaving more and more like a penny stock, not major currency.

I see this as a China short-squeeze and chance to reset for more AUD selling.