By Chris Becker Here comes the Fed with more punch to revive this boring party! The NY chief of the Federal Reserve, John Williams, gave a big boost to risk markets overnight by goosing the easing question, sending stocks higher and slamming the USD down against all the undollars. Gold has broken out to a
Australian Dollar Analysis, News and Forecasts
The Australian dollar, Aussie dollar (AUD) is one the world’s great commodity currencies. Founded in 1966 and floated in 1983 the Aussie “battler” is the 5th most traded currency in the world despite the economy being only the 12th largest by GDP.
The Australian dollar spent much of its first two decades post-float consistently devaluing from the pre-float value of $1.48 US dollars in 1974 to a low of 47 cent in 2001.
Subsequently it broke this huge downtrend with the rise of the Chinese economy and it’s insatiable demand for raw materials – especially those inputs into steel production, iron ore and coking coal – which Australian was endowed with in abundance. It topped this enormous turnaround in 2011 at $1.11 versus the US dollar.
As the super cycle entered decline so too did the Aussie, falling to a low of 68 cents in 2016 and still falling.
However, the Australian dollar had became popular as a small reserve currency holding with foreign central banks. As the value of the currency virtually halved during the bust they kept buying. Because global central banks were fighting both low inflation and oversupply worldwide, many engaged in an overt currency war, deliberately devaluing their currencies to capture or protect global market share of production. This was exacerbated by private sector flows pursuing the “chase for yield”.
This proved a challenge to Australian macroeconomic managers as the commodity bust persisted. Without the lower value, the Australian economy was unable to compete in non-resource sectors. The Reserve Bank of Australia embarked on a series of interest rate cuts, jawboning and, eventually macropudential policy, to bring the Australian dollar to fair value.
There are five drivers to the currency. Australia’s relative position vis-a-vis Chinese and its own growth; interest rate differentials, the strength or otherwise of the US dollar; the terms of trade and sentiment. Each of these tips into any fair value model but over time the primary driver is the terms of trade. The relative strength of each waxes and wanes with wider trends. For instance, during the “tech bubble” of the late nineties the Australian dollar was battered lower by poor sentiment as it was seen as a pre-tech dinosaur. After the “tech bust”, the currency rapidly recovered as sentiment turned favourable for real assets like commodities.
MacroBusiness covers all apposite data and wider analysis of these issues daily.
Stocks in Asia are again under pressure following the poor lead from Wall Street, but also from a slump in trade figures in Japan, sending Japanese stocks falling as Yen gained against USD. The Aussie dollar has lifted inexorably after a poor unemployment print, dragging the Kiwi along for the ride. The Shanghai Composite gapped
By Chris Becker The US earnings season is putting several headwinds in the way of an ever-rising stock market with US bourses falling overnight in disappointment. European markets fell as well as the prospect of a hard Brexit becomes more likely, with Treasury yields falling again in response. Looking at the action in Asia yesterday
Stocks in Asia are flat again with only the ASX200 putting in a positive performance as concerns over Trump’s mishandling of the trade war with China rise again. The USD is relatively calm although Pound Sterling remains under pressure with S&P futures flat before tonights open. The Shanghai Composite has been unable to get out
Stocks in Asia are mixed again with the return of Japanese stocks as the USD gains strength against most of the major currencies, particularly Yen, although Kiwi keeps on as its CPI print comes in as expected. The Shanghai Composite continues its slow start to the week, falling 0.2% going into the close, currently at 2934
By Chris Becker The latest US earnings season has started, and while the headline Dow is up, the broader S&P500 is treading water as US interest rates continue to fall. The USD is up against most of the majors, with oil prices abating due to lesser concern about the hurricane in the Gulf of Mexico affecting
Stocks in Asia are mixed with the lack of trading in Japan because of yet another holiday but also due to the latest Chinese GDP print which showed a slowing trend, but an economy still powering ahead with industrial production and retail sales figures much higher than expected. Bitcoin is having a tough time as
By Chris Becker Friday night saw US shares advance even further as the prospect of the Fed cutting rates firmed, while the USD lost ground against all the undollars except gold. US Treasury yields rose to a one month high but still unsettled with a much firmer than expected PPI print backing up the recent
Stocks in Asia have generally pushed higher following the record highs on Wall Street overnight with the USD still selling off against the undollars as traders readjust to the Fed’s dovish stance. Local stocks are the exception with the fall in iron ore price taking down Rio Tinto and BHP, while Bitcoin is struggling as
by Chris Becker The latest inflation figures from the US may have thrown a spanner in the works of an easing Fed, upsetting bond markets overnight. More from CNBC: U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June amid solid gains in the costs of a range of goods and services,
By Chris Becker A big spike in US interest rates overnight still couldn’t hold back the Dow making a new record high, although the broader S&P500 failed to get over 3000 points again. European stocks continued to wobble while the USD barely moved following the latest core inflation data. Looking at the action in Asia
Stocks in Asia have pushed higher with the USD sold off against the undollars as traders readjust to the Fed’s dovish stance following Fed Chair Powell’s testimony to Congress last night. Gold is soaring above $1400USD per ounce again while the Australian dollar is having another push to get back above 70 US cents. The
By Chris Becker It was an easy night for short USD traders as Fed chief Powell reiterated the central banks dovish stance, sending interest rates and King Dollar down and lifting stock markets and commodities. Oil spiked higher on a greater than expected inventory drawdown while base metals also rallied alongside gold, although Bitcoin took
Stocks in Asia remain unsettled as traders await Fed Chair Powell’s testimony to Congress tonight, with some optimism sneaking through particularly locally as the Australian dollar goes lower again. Currency markets are also mixed, with the Euro steady while Pound Sterling is selling off going into the City open, while the Aussie and Kiwi remain under
by Chris Becker Yesterday’s NAB Business Survey put the Australian dollar under pressure, but it wasn’t until overnight markets reacted to the poor print coupled with their unease surrounding the upcoming Powell testimony that saw support disappear for the Pacific Peso which crashed to a two week low: And now its ripe to fall
By Chris Becker Overnight markets were effectively sidelined by traders waiting for Fed Chairman Powell’s testimony with European stocks retreating while US stocks put in some minor gains, led by tech issues on the NASDAQ. Interest rates nudged higher with the 10 year Treasury up to 2.07% as the chance of a rate cut from
Stocks in Asia are still unsettled although Japanese stocks are holding up due to a much weaker Yen. While most major currencies are steady, Bitcoin continues to soar and gold is deflating. The Shanghai Composite continues to fall, down over 0.5% to be at 2917 points going into the close. The Hang Seng Index is down
by Chris Becker The Australian dollar was hanging on against the USD this morning, despite the latter’s strength post-Friday’s stronger than expected NFP print which has dashed expectations of accelerated interest rate cuts by the Fed. Although ironically, that’s probably what’s on the way as the US economy splutters into recession. But the latest NAB
By Chris Becker US stocks gapped down on the open and remained in the red all session in response to the weak session in Asia, with European bourses barely keeping afloat as well. All because the punchbowl might be filled only halfway by the Fed instead of overflowing, as US Treasuries remained slightly above the
Hope is not a good enough driver for risk markets, with Friday nights’ US unemployment print dashing expectations of sooner and larger rate cuts from the Federal Reserve. After a sharp fall on Friday, undollar assets have come back slightly in Asian trade with gold back above $1400USD per ounce while Yen was bought on
by Chris Becker The Australian dollar took a nose dive on the US unemployment print on Friday, with the strong result (224K jobs created vs 164K expected) sending interest rate cut expectations by the Federal Reserve down, thus launching the USD higher against all the undollars. Now is this move just temporary, given the Pacific
By Chris Becker The biggest event on the economic calendar – US unemployment or non-farm payrolls (NFP) – on Friday night shook up risk markets as the strong print markedly reduced expectations of further interest rate cuts by the Federal Reserve. This saw the USD soar, Treasury yields also increased, with gold smashed back below
The Shanghai Composite is setting the mood here in Asia by treading water around a tight range, although it briefly dipped below the 3000 point barrier earlier in the session it looks sit to finish a very dull week indeed. The Hang Seng Index is also putting in yet another scratch session, little changed at 28827 points,
By Chris Becker With US markets closed for a holiday, other risk assets still pushed higher in their absence with German bond yields now at a record low and matching the ECBs negative deposit rate. Currency markets were very stable as the lack of volume impacted movements while traders await tonight’s NFP print. Looking at
Share markets in Asia were mixed despite a very strong from overnight markets as traders weigh up the closed US session and the following NFP print on Friday night. The Australian dollar was the biggest mover today while other pairs are marking time as well, with the undollars Bitcoin and gold remaining strong against King
By Chris Becker A much firmer response from the risk on crowd overnight as US stocks pushed to new highs while US interest rates plumbed new lows. Sentiment was helped on bond markets at least by nominations to the ECB and Fed, with Christine Lagarde to become the next ECB president. Treasury yields dropped even
Share markets in Asia are losing their optimism midweek as traders prepare for the non farm payrolls on Friday with the background of flailing manufacturing and a lower energy prices not helping risk appetites. The Shanghai Composite has fallen over 1% to just above the 3000 point barrier, barely holding on to its previous bounce-back. The Hang
By Chris Becker Another board full of green with US and European stocks lifting overnight alongside Treasuries as the 10 year yield dipped below the 2% mark on some very dovish comments coming from the central bank wonks as the global manufacturing slowdown gathers pace. Gold saw a resurgence as USD fell slightly against the
Share markets in Asia are mixed today despite the green board across other risk markets overnight, as traders look for more clues and innuendo surrounding the trade war truce between the US and China coming out of the G20 on the weekend. In other words, don’t trust a word either side has said and verify…