Nordea with the note: It seems as if chair Powell is already running for the hills in the average inflation targeting relationship. A few months of vastly overshooting actual inflation and Powell and the FOMC aborts the AIT-regime. This was almost faster than even we dared to anticipate, even if we have been clear frontrunners in calling
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.
The hawks are squawking as stock markets fell across the risk complex on Friday night with continued fallout from the recent US Federal Reserve meeting. Wall Street tumbled, led by the Dow which was down for the fifth session in a row, while bond markets saw more yields rising on the short end of the
Forex markets have comprehensively puked their recent funk into a period of volatility and the Australian dollar is covered in stink. DXY is re-entering its bull market and EUR is getting murdered: The Australian dollar has destroyed the neckline of its head-and-shoulders top against DXY. Its equally weak versus JPY. EUR is falling almost as
Asian share markets are finishing the week in mixed fashion yet again, echoing similar moves on Wall Street as seismic shift in Federal Reserve intentions continues to resonate throughout risk markets. Gold is struggling again going into the London session, currently just above the $1783USD per ounce level after being dumped below the $1800 level
Nordea with the note: A relatively aggressive dot-plot makes for a hawkish read-through to a potential tapering time-plan towards the end of this year. We also seem to have passed ”talking about talking about tapering” to actually talking about tapering. Highlights: – 7 members of the FOMC committee expect lift-off in 2022, while 2 hikes
Share markets were largely contained as the USD extended its gains against the majors following the latest US Federal Reserve meeting. Wall Street remains spooked but has some signs of life remaining with local stocks almost unphased as the Australian dollar skirts new weekly lows. Bond markets are flipping around as well with short dated
Sometimes markets are like taking candy from babies. The Wall Street commodities bubble is bursting. The inflation trade is caput. The Australian dollar is getting poleaxed by both. DXY has a double bottom in place and is off to the races as EUR is smashed: The Australian dollar mega head-and-shoulders top just broke. I would
Asian share markets have reacted in mixed fashion to the overnight moves on Wall Street as the latest Fed meeting transmits a more hawkish approach sooner. The USD continues to strengthen against the major currencies with gold struggling going into the London session, currently just above the $1800USD per ounce level. Bitcoin is vainly trying
A seismic shift in risk markets overnight with the US Federal Reserve moving its so-called dot plot into the affirmative for more rate hikes, sooner than expected. This spooked Wall Street and saw the USD soar against all the major currencies, plus wiping out gold prices. Bond markets saw a big increase overall in yields
Policy error time. The Fed has blinked and the Australian dollar just broke. Don’t cheer too loudly. My risk case for a decent market correction just firmed up. DXY blasted higher: Australian dollar was pulverised and the giant head and shoulders top is back in play: Gold was poleaxed. Oil held up but all commodities
Asian share markets are mixed again with Chinese bourses continuing to fall, with Japanese stocks joining in while local issues are unchanged. The USD continues to strengthen against the major currencies as volatility drops going into tonight’s Federal Reserve meeting. Gold is trying to lift off the floor after selling off overnight and is slowly
Forex last night was a reflection of weakening US data, fading inflation and diving commodities. DXY was firm as was EUR: Australian dollar was hit on all major DM crosses: Oil is to the moon on strong US inventory draws. Gold is caput: Base metals were hammered: Big miners too: EMs stocks were hit: Junk
Mixed economic news overnight from the US saw Wall Street wobble and turn away from yet another record session high with the latest retail sales much weaker than expected. Currency markets were mixed although Pound Sterling and Aussie dollar fell back against USD while Euro was contained yet again. Bond markets saw a slight increase
Asian share markets have diverged with Chinese bourses (except the satellite ASX200) dropping while Japanese stocks are helped along by a much lower Yen as USD continues to strengthen against the major currencies. Gold is struggling after selling off overnight and is barely moving at the $1866USD per ounce level with traders of all sorts
Nataxis with the latest on Bitcoin: Bitcoin: adjustment nearly over? Since mid-May, Bitcoin and crypto assets have been in crisis. After a high at $63,500, Bitcoin collapsed to almost $30,000, Ethereum went from a high of $4,400 to a low of $2,000. The capitalisation of crypto assets has fallen from a high of $2 tr
The first session of the trading week was a modest one overnight and while tech stocks on the NASDAQ bloomed ever higher, most other equity markets stalled out as bond yields rose across the board. Currency markets were equally sanguine without much intrasession volatiltiy although Yen sold off appreciably against USD while commodity prices saw
According to Bloomie, hedge funds are long the Australian dollar: Leveraged funds hold a net long position of 20,509 contracts in the currency. Various hedgies talked their own book for higher on the forthcoming speech by Phil Lowe and the next jobs report. Actually, the overall market is now short the AUD by 9k contracts
With the US inflation report out of the way, Friday night saw the go signs flash green on stock markets while the USD pounced back on no major news against the major currencies, although the latest US Michigan consumer sentiment survey surprised to the upside. Bond yields saw new lows with 10 year Treasuries again
A fairly mixed end to the trading week here in Asia following last night’s US inflation print and the latest ECB meeting which embiggened US stocks to new highs but hasn’t quite translated into firm moves across other stock markets so far. The USD is losing ground against all of the majors, but particularly Euro
Us yields may be falling owing to the peak in its inflation burst and coming disinflationary bust, but they can;t down to Aussie yields which are falling even faster. The Aussie 10 year yield inverted negative versus the US for the first time in eight months overnight. During the recent bond back-up the spread blew
A big night on risk markets with the latest US inflation report coming in as expected, with the ECB meeting also not produce any surprises as stocks lifted across the board. Bond markets spiked before settling down with 10 year Treasuries putting in a three month low with USD slipping against the majors again but
Forex finally got what it was asking for: lot’s of US inflation. But, as expected it was a bust for markets that have long priced it. They are now moving quickly towards the MB position of disinflationary shock. DXY and EUR barely moved: The Australian dollar remained thoroughly rangebound as well: Gold and oil lifted:
Its a big waiting game out in the risk complex right now as traders position for tonight’s US inflation report, with Wall Street stalling again overnight. Bond markets however are rallying with a big move in 10 year Treasuries that seems to be presaging a robust inflation print while the USD is also slowly firming
Forex is still range trading as we await tomorrow’s inflation numbers. But bond markets have already made their call. Yields have broken down as markets sell the inflation fact and buy into the MB script. DXY was firm as EUR eased: Australian dollar fell against everything: Gold may be rolling. Oil ain’t! Base metals have
A sea of red across stock market here in Asia following a mixed mood overnight with hesitation possibly turning to fear across the risk complex as the US inflation print looms tomorrow night. The USD remains in a weakish state as Euro and Pound Sterling start to firm going into the London session, although gold
More Bitcoin voodoo today. What does it say when Donald Trump becomes the voice of reason? Watch the latest video at foxbusiness.com He went on to say that it ought to be “highly regulated”. Outlawed is my preference. It’s nothing more than a worthless private currency swindle made on the principles of regulatory arbitrage. Meanwhile,
Stock markets remain in hesitation and consolidation mode as we head into the all important US inflation report with overnight sentiment still mixed. Bond yields pulled back while the USD found some lost ground with gold still unable to clear the $1900USD per ounce level. European data was a little softer than expected, particularly German
Forex is paralysed again as we await the US inflation print on Friday. DXY and EUR were stable: AUD was unmoved against all crosses: Oil’s march slowed as gold fell: Base metals were mixed: Miners too: EM stocks eased back: Junk is fine: US yields are selling the inflation fact: Which is giving growth stocks
Stock markets remain quite flat and uninterested here in Asia following a similar mood overnight with the fallout from the bad-but-good-hangon wait a minute US unemployment report still causing a lot of hesitation in risk markets across the complex. The USD remains in a weakish state, but has firmed slightly this afternoon against undollar assets,