DXY was all over the place last night as Omicron wrestled with an increasingly hawkish FOMC: The Australian dollar was weka on the crosses but desperate traders saved it from a bowel shaking new low against USD: Oil is falling as fast as Goldman Sachs credibility: Base metals are calm by comparison: Miners are also
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.
Dead cats are bouncing all over the place today in response to what was a tepid session in overnight stock markets with Asian shares very mixed alongside downbeat Wall Street and European futures. A run on safe havens is seeing Euro and Yen beat back the stronger USD while the Australian dollar is about to
FT has the scoop: The chief executive of Moderna has predicted that existing vaccines will be much less effective at tackling Omicron than earlier strains of Covid-19 and warned it would take months before pharmaceutical companies can manufacture new variant-specific jabs at scale. Stéphane Bancel said the high number of Omicron mutations on the spike
Three takes. First, Mizuho, which has been consistently virus bearish over the past year: Omicron–what we know “Omicron”, as the WHO has classified it, is reported to have a material number of spike protein mutations. It seems likely at this point that this new variant will have spread much more than has already been identified,
Risk markets recovered some of their nerve after the overreaction on Friday to the new COVID variant breakout, despite Asian share markets still falling on Monday. A higher than expected German CPI print and US pending home sales data also helped risk spirits. European shares and Wall Street lifted more than 1% while bond markets
DXY rebounded lat night with everything as the Omicron panic eased: That kept the AUD holding open the trap door: Oil held a lot of the losses: Metals firmed: Miners are trying to base: EM stocks remain below key support: Junk managed a little hockey stick: Yields kept most of the gains: Which aided the
Stocks tried to bounce back from the big falls on Friday following the (over) reaction to the latest COVID variant news, with Asian stock markets continuing to sell off mildly while Wall Street and European futures are upbeat. The USD is taking back positions against a transitory higher Euro while Yen safe haven bidding is
TS Lombard with the note: For the PBoC, growth and financial stability concerns trump inflation and worries about monetary policy divergence. The bank’s recently released Q3 monetary policy report indicates a dovish shift and confirms our expectations of sustained policy support for the economy, particularly for the property sector. A 50 bps RRR cut is
The Australian dollar is sitting right on vital support as markets digest Omicron. So far it has held but a break of support here opens big downside potential: The ASX200 has gapped 1.2% at the open but is being aided by firm American futures: Yields are rising as risk diminishes. Markets have this completely backwards.
Risk markets lost their nerve on Friday night in the wake of the Omicron breakout across the world, the new COVID variant proving too much especially for European shares which fell over 4% while Wall Street lost more than 2% in thin trade due to the Thanksgiving holiday. Currency markets were volatile with Euro spiking
DXY was smashed Friday night and EUR roared as the NU COVID strain rocked markets: Australian dollar was NUked on all major crosses: Oil! Metals were not hit quite so hard: Nor miners: But, ominously, EMs stocks shattered support in their bearish pattern: Worse, the rout was led by junk debt: Bonds boomed: And stocks
Heading into the end of the trading week, risk markets are falling out of bed due to the latest COVID variant news, with Asian stock markets heavily sold off and USD bid up strongly, although Yen safe haven bidding is also gathering pace. Gold has broken out somewhat, although this has been overshadowed by other
Overnight share markets were relatively quite given the US Thanksgiving holiday with European shares finally putting in a decent positive session, while bond market volatility was lower due to the closed markets. The USD was down slightly against the majors although the Australian dollar remained below the 72 cent level, while gold continues to struggle
Heading into the end of the trading week, Asian stock markets are starting to find some bullishness helped by lower domestic currencies across the region as USD remains very strong against most of the major currency pairs. Gold is climbing very slowly but has been unable to get back above the $1800USD per ounce level
Credit Suisse again today: Our expectation for ongoing USD gains remains intact, and becoming broader based. Last week, several Fed officials suggested that the Fed could potentially speed up the pace of asset purchase tapering beyond what is currently planned. On top of this, President Biden’s decision to re-nominate Jerome Powell as Fed Chair removed
Overnight share markets were still mixed despite a late rally on Wall Street as bond market volatility continued with Treasury 2 years almost at a two year high while the 10 year almost hit the 1.7% handle before slightly retreating. While Wall Street was up, European stocks continued their selloff amid more COVID lockdown concerns,
The assault upon the Australian dollar is coming from a tearaway DXY as EUR wilts: The Australian dollar was universally weak. It’s chart is forming up a bearish descending triangle retest of the lows: Oil was firm, gold not: Energy is spiking again thanks to European gas and that is keeping metals afloat: Big miners
The mixed start to the trading week for Asian stock markets continued with most bourses going nowhere, while Japanese share markets reopened with some large losses even as Yen continues to soften against USD. The USD remains very strong against most of the major currency pairs with Euro and Pound Sterling still at weekly lows
Overnight share markets remains mixed as volatility from bond markets and a steeper expectation of the next Federal Reserve rate rise (now slated for July 2022) impacted risk taking. Wall Street diverged again with tech stocks taking a beating while European stocks continued their selloff despite a much weaker Euro. USD was largely unchanged but
DXY held its recent gains as EUR bounced a touch: The Australian dollar hit new lows for the move: Gold fell, oil rallied: Base metals were mixed: Big miners bear market rallied: EM stocks are rapidly heading back to the cliff’s edge: As junk folds: Long yields rose but the curve is unmistakeably flattening: GAMMA
The mixed start to the trading week for Asian stock markets continued with a lack of direction quite evident as Chinese bourses continued to diverge, Japanese markets were closed while local shares bounced back sharply. The USD remains very strong against the major currency pairs with Euro looking dire indeed while gold is frantically trying
Lombard with the note: Last Friday, Fed Vice Chair Richard Clarida reasserted the Fed’s declaration of independence of monetary policy from what other central banks are doing. In his speech “Perspectives on Global Monetary Policy Coordination, Cooperation, and Correlation.” he said — “Today I will make a somewhat different, and less often discussed, case questioning
Equity and bond market volatility increased overnight not due to the economic calendar but the twin catalysts of OPEC+ reconsidering their options on the back of oil reserve release plans and the re-nomination of Fed Chair Powell by President Biden. Wall Street was up before the nomination but quickly retraced with the NASDAQ oversold as
DXY is a raging rocketship as EUR crashes: The Australian dollar was weak: Oil and gold too: Base metals rallied on misplaced China stimulus hopes: As did miners: EM stocks were hit: Along with junk: As yields spiked and the curve pancaked: Stocks did not like it: Westpac has the wrap: Event Wrap US President Biden renominated Powell for
Nordea with the note: It used to be “two weeks to flatten the curve”, but somehow it has developed to “imprison the unvaccinated (or worse)”. Lockdownistas have been on parade also over the past week, with “ihre papieren bitte”-systems being implemented in many countries to try to boost the injection rate. Ireland has implemented a semi-lockdown
An uneasy start to the trading week for Asian stock markets as Chinese bourses continued to diverge in fortune, Japanese markets tread water while local shares continue to slump. The USD is holding strong against the major currency pairs with Euro looking to put in more monthly lows while gold is trying to hold on
Friday night saw risk sentiment continue to wobble with European COVID restrictions pulling down oil prices significantly, with inflation concerns still lingering. Wall Street was quite mixed as tech stocks soared, while the S&P500 faltered alongside European bourses which retreated across the continent. USD strength is back on track with the Euro putting in a
Another very mixed finish for Asian stock markets as Chinese bourses diverge in fortune, Japanese market clawback there losses while Australian shares were largely listless. The USD is holding ground after a big swingback in Euro previously, while the Australian dollar remains below the 73 handle and gold holds fast at the $1860USD per ounce