DXY was stable last night:
AUD is unconvincingly grinding higher
With no help from North Asia:
Oil fell on Gaza peace plans:
Dirt meh:
Big miners meh:
Pooh bear has his rally:
EM junk is trending bullish:
So long as yields dump:
Stocks took a breather:
The AUD is being helped by a new extreme bearish short on CFTC, so don’t expect much downside in the short term:
However, I think we can see the outlines of the AUD mega-bear market I’ve discussed over the past six months coming more sharply into view.
The three major trends of the developing business cycle are all super AUD bearish:
- AI, Peak Fat, and supply chain repatriation supercharge US growth outperformance.
- The five dooms of demographics, debt, deflation, deglobalisation and dictatorship demolish Chinese growth permanently.
- Decarbonisation.
Put these three together, and what you get for Australia is a kind of super-deflationary bottomless pit as:
- Bulk commodity prices relentlessly collapse in a replay of the post-Japan 1990s bust culminating in iron ore at $20.
- Energy prices collapsing globally but continuing to hollow out the Aussie industry.
- AI colliding with the immigration-led economy to deliver a worker and wages apocalypse.
This is an economy headed into chronically weak nominal growth burdened with global-leading household debt run by a pack of property developer gangsters.
Taxes will have to rise, requiring world-beating low-interest rates versus other developed markets that offer far better returns and yield spreads.
An AUD with a 4-handle won’t happen overnight, but the conditions for it to happen are now apparent.
