Strong corporate earnings could not keep Wall Street elevated overnight, as the self induced selloff in Chinese tech issues turned into a bath of blood now spilling over and upsetting the mood in risk taking world. Treasury yields fell back to their recent lows while the USD was mixed everywhere, selling off mildly against Euro
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.
A bloodbath in Chinese tech stocks is putting a dampener on risk taking here in Asia while European and US futures indicate lower opens this evening. Risk currencies like the Aussie dollar are falling back while commodities are holding on, although gold continues to drop below the $1800USD per ounce level. Bitcoin is holding on
MUFG on the Fed this week: Fed in focus with USD set to remain supported as shorts are lightened USD: Fed tapering discussions “progressing”. The primary macro event this week will be the FOMC meeting on Tuesday and Wednesday and these meetings are increasingly important given we are gradually approaching the time of commencing the
Strong corporate earnings kept Wall Street elevated overnight, but only just with the selloff in Chinese tech issues overshadowing the new record highs as Treasury yields bounced a little after some strong auction results. USD sold off mainly against Euro while commodities lifted with oil up 1%, copper up over 4% while gold fell back
While Wall Street made a new record high on Friday night that embiggened Asian stocks today, Chinese stock markets are selling off on their own as US-listed issues bear the brunt of Beijing’s self-induced tech breakdown. Commodities and currencies are more stable although Bitcoin gapped sharply this morning, lifting more than 12% to almost break
From JPM comes the understatement of the century: The financial stability risks of stablecoins The financial stability risks of stablecoinsAmong the more interesting and potentially impactful developments of explosive growth in cryptocurrency markets has been the advent and broadening acceptance of stablecoins. As we have noted in prior work, these tokens form the backbone of
Nobody can stop the music as Wall Street surged once more on Friday night to a new record high with the latest corporate earnings a strong tailwind. While stocks rose everywhere, currencies and bond markets were largely unchanged with commodities also mixed as oil and copper rose slightly while gold and iron ore fell back.
Forex was stable Friday night as the week’s fireworks subsided and risk rallied hard. DXY was up and EUR down: The Australian dollar dead cat faded: Gold fell, oil firmed: Metals were firm: Miners lifted: EM stocks not so happy: Junk fine: Curve squashed again: Which drive FAAMGS mad: Not much data to report from
Asian stock markets are listless going into the end of the week due to the absence of Japanese traders and continued concern over delta variant outbreaks in the region. Bitcoin however is lifting sharply this afternoon, almost tripping over the $33K level to make a new weekly high while gold is falling back again to
Sentiment continues to swell positive with another solid night across all equity markets with tech stocks leading the way this time due to some solid earnings results on Wall Street. Bond yields slipped on a very dovish ECB meeting with commodity prices continuing their own bounceback, oil up 2% alongside copper while gold got back
Optimism is creeping back across Asian stock markets in response to the broad moves higher on both sides of the Atlantic as the buy the dip crowd steps in, helped along by a surge in oil prices. Bitcoin is floating along above the $32K level thanks to some Elon-pumping while gold is still suffering after
The big fill in the recent dip in equity markets continued overnight with European shares outshining Wall Street, although the latter is almost back to where it started. Oil played catch up with a 4% rise in Brent futures while gold fell back despite a rise in undollar assets as Euro and the Australian dollar
The forex complex enjoyed some more relief overnight as DXY weakened and everything followed suit in usual fashion. EUR lifted: The Australian dollar finally dead cat bounced: Oil blasted higher after days of Wall Street begging: Metals were mixed: Miners, EM and junk all up: US yields took off with oil: Stocks too, led by
A generally positive mood across Asian stock markets in response to the bounceback on Wall Street overnight, although oil prices remain depressed and continue to drag commodity currencies including the Australian down further. This move is likely to be shortlived as the COVID 19 delta variant economic impact has not yet been priced in. Bitcoin
Forex markets enjoyed a relief rally overnight but not AUD which remains very weak. DXY is still grinding higher too, a warning for every reflationist The Australian dollar dead cat splattered: ‘ Oil is done. Gold too, in my view: Metals bounced: Miners a bit: EM stocks too: Junk is still fine. Any decent growth
Still suffering from the crash resulting from its now-notorious four-headed hydra pattern, Bitcoin joined another chartist’s nightmare yesterday, breaking the neckline of its monstrous head and shoulders top: The drover’s dog can tell you that opens up big technical downside. Which is very likely voodoo but all the more apposite for being so. As Hamish
Asian stock markets continue to selloff in response to the wider risk-off mood prevailing on overseas markets overnight, with oil prices off by nearly 10% in response to both more supply and probable economic slowdowns as the COVID 19 delta variant sparks widespread concern. Bitcoin has broken below the $30K level and its start of
Blown to bits. Credit Suisse with the note: AUDUSD has resumed its downtrend and we maintain our core bearish outlook for .7209 and eventually .7085/43The brief consolidation in AUDUSD has come to an end for a break of key support from the 23.6% retracement of the uptrend from 2020 at .7418/09. With a major top
Sorry this is late. Glitches this morning. Forex markets were volatile again last night. DXY is breaking out on safe haven flows. EUR sagged: Australian dollar was smashed again: Somebody needs to educate Wall Street bulls about oil: Commodities sagged: Big miners puked: EM stocks look ugly with an descending triangle forming: Junk was hit
Things are not looking good in risk-taking land with the COVID-19 delta variant causing a lot of concerns that are spilling over into equity markets which fell sharply overnight. Coupled with the snap OPEC supply surge that has seen oil fall over 7%, commodity markets and commodity currencies are selling off while Treasury yields are
Nordea with the note: We warned a couple of months back how rising food prices risked fueling unrest in Emerging Markets, and it now seems as if several political triggers made our projection come true. South Africa, Cuba and Columbia (in May/June) are just a few examples of recent politically triggered protests that have likely
A snap OPEC meeting over the weekend has sent oil prices lower as more supply will be coming online in August, helping some risk currencies although the Aussie dollar missed out. Sentiment on stock markets is very poor as we start the trading week in reaction to the falls on Wall Street on Friday night
Sentiment was mixed all of last trading week and it culminated in a co-ordinated selloff on Wall Street to end the trading week on a bad note. It was all about inflation – expectations that is – with the US running a little scared the so-called “transitory” inflation may turn out hotter than expected. Bond
Forex markets clearly beginning to signal increasing concerns about global growth. Friday night witnessed some of the most bearish action we’ve seen in 2021. DXY was firm and EUR soft: Australian dollar free fell to new seven month lows: The market is moving aggressively to get short: Oil and gold were hit: Base metals did
Risk sentiment has finished the week very mixed again in Asia as overnight stock markets pulled back following hesitation across Wall Street as its earnings season gets underway. USD is continuing its gains against the major currency pairs, while Bitcoin remains deflated as it drops below the $32K level after making a new three week