Australian dollar crushed by European recession

DXY held firm Friday night:

AUD was crushed:

Commods popped:

Miners fell:

EM stocks are having another crack:

Even junk did better:

Bonds were bid as BOJ YCC tweaks were a wash (shocked, shocked!):

Stocks relief rallied:

The AUD is getting hosed by the European recession, which will worsen before it gets better. TSLombard:

…the ECB is now acknowledging the impact of monetary tightening on credit, and, indeed, the latest ECB Bank Lending Survey (BLS) and bank credit flow data – key for the heavily bank-intermediated EA economy – show further deterioration. Besides a further tightening in banks’ lending standards, EA firms and households’ demand for loans fell at the fastest pace since the Global Financial Crisis, contracting again well below banks’ expectations for Q2. As we pointed out in the past, the breakdown of the factors behind the freeze in loan demand for firms confirms that, while rising interest rates are a key drag on new borrowing in line with monetary policy tightening, businesses appear to be running out of investment opportunities that need financing (“fixed investment”) – consistent with the EA stagnating since 2022Q3 and, historically, an ominous sign for the health of the underlying economy. What is more, demand for inventory and working capital financing has now also started to contract. Bank credit flow data echo the message from the BLS. Household credit on a 3-month rolling average basis shrank for the first time since the peak of the EA sovereign crisis, while nonfinancial corporates’ credit flows stalled again, confirming that the little gains made in the past few months were a blip.

Stocks are cheap but earnings are about to clubbed like a baby seal. I can’t see why anybody wants to be long Europe at this juncture. Yet everybody is:

While EUR corrects so will AUD versus USD.