The risk mood overnight was definitely bearish although the usual BTFD crowd stepped in at the last moment to rescue Wall Street from posting a nominal loss, with the latest initial weekly jobless claims coming in better than expected. The volatility in currency markets outweighed stocks with USD continuing its gains against undollars with Pound
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.
Forex markets are in captilulation. Fed taper is being priced and DXY running hard off a big double bottom. EUR is the reverse: The Australian dollar is being pulversmashed: Gold is doing OK all things considered. Oil is fooked: But not as fooked as base metals. Copper is at the neckline of a giant head-and-shoulders
A sea of red across Asian stock markets with European and Wall Street futures also looking dim as we head into the end of the trading week. Continued concerns around a Fed taper emptying the cash splash punchbowl casino that is risk markets everywhere is causing wobbles across commodity markets as well, although gold is
It’s all going south Downunder now. As the reality of COVID apartheid and crashing commodity prices dawns on markets, everything is on the move. Bonds are bid and yields breaking down: The curve is being slain. It’s far too steep still: Spreads to the US are widening slowly: Driving the AUD down: ASX is toppy:
The US Federal Reserve has indicated that it wants to turn the taps off/stop filling the punchbowl/buying every asset in sight “sometime this year” in its latest minutes realised overnight and of course, rational economic perfect markets lost their collective shit. Wall Street fell across the board while the USD continued its gains against undollars
Asian stock markets have had divergent fortunes in today’s session with Chinese stocks rebounding following yesterday’s latest tech selloff, while local shares were dragged down by BHP losing 7% as it removes its dual listing in London. Concerns around COVID-19 in the US are still weighing on risk markets with USD still quite firm against
Covid concerns in the US and a poor retail sales print spooked markets overnight, already reeling from the Afghanistan collapse and weak data out of China. Wall Street finally had a sizeable dip instead of yet another record high but the real action is in currencies with the USD resurging against everything except defensive Yen,
The sea of red across Asian stock markets continues to deepen as the combined fallout from the Afghanistan collapse and increased concerns about COVID-19 in the US weigh on risk takers everywhere. The USD is firming against most of the currency majors except gold which is closing in on the $1800USD per ounce level as
Risk markets initially followed the poor start to the trading week here in Asia with European bourses taking back their recent gains, as did Wall Street before a mid session fill and then rally saw a new nominal record high for the S&P500 plus a small blip higher for the USD. Commodities remained under pressure
Forex livened up a little last night as weakening Chinese data injected frisson. DXY firmed as EUR fell: The Australian dollar was puked lower on all crosses, especially JPY. Verus USD it looks poised to break lower: Gold lifted as oil was whacked: Base metals were soft: Miners fell: EM stocks are slipping off the
It’s a sea of red across Asian stock markets as we start a new trading week, following Friday night’s meek moves on the latest US consumer sentiment survey and of course, the Taliban taking over “Afghanistan” (which is likely not to exist as a nation from here on in). This has seen increased volatility across
UBS with the note: Perhaps the biggest debate in crypto concerns if and when ether might wrest bitcoin’s crown. BTC has a market cap that is more than twice as big and still boasts around two thirds more active addresses. But ETH is starting to nose ahead on metrics like traded volumes and trade intensity,
Nordea with the note: Growth and inflation are set to decelerate over the coming 9-12 months. The deceleration will, however, come from oddly high rates and be combined with strong labour markets. The market conclusions are not as straightforward as usual in decelerations If you want to receive a copy of Week ahead directly in
Friday night saw the release of the latest US consumer confidence survey which unexpectedly dropped to a near decade low, most likely due to the unvacinnated chaos spreading across the Trump States as the delta COVID variant creates an epic third wave. This saw a big drop in USD and Treasury bond yields following an
Forex markets followed US economic data Friday night as American consumer confidence sagged. DXY was belted and EUR lifted: Australian dollar short squeezed higher: Now that the market is getting quite short: Oil fell, gold rose: Base metals firmed: Miners were mixed: EM stocks are still perilous: But junk did better: As yields fell: And
Asian stock markets are finishing the trading week on a meek note, outside of the local market that is, despite Wall Street putting in another record high overnight. The USD is still regaining its strength while gold lifts a handful of bucks above the $1750USD per ounce level after being largely unchanged throughout today’s session:
A drop in US weekly initial jobless claims kept risk markets elevated overnight, although commodity markets pulled back as the USD rose alongside Treasury bond yields. Wall Street eked out yet another record high as European stocks joined the party. Oil pulled back again on a private survey result, with both markers down 1% or
Forex markets were the reverse of the night before with a firm US PPI enough to lift DXY with all of the usual consequences. EUR fell: Australian dollar was universally puked: Commodities, miners and EMs fell: Yields edged higher: Stocks were led by FAAMGs: Westpac has the wrap: Event Wrap US weekly initial jobless claims fell
Asian stock markets are listless following what looked like a good night for risk markets with the passing of President Biden’s infrastructure plan overshadowed by a weaker than expected inflation print that should have reset expectations of the Fed tapering later rather than sooner. Undollar assets are giving back some of their gains from overnight
Credit Suisse with the note: Below .7317/15 should confirm a bearish “wedge” continuation pattern AUDUSD fell further on Monday and is increasingly close to confirming the much flagged bear “wedge” continuation pattern with a break below .7317/15. This would suggest the core down trend is resuming, with support then seen next at.7288, ahead of .7221/09–the
The long awaited but ultimately weaker than expected core US inflation print overnight saw a reversal in the rise in Treasury bond yields and strong USD post last week’s US unemployment data with the “undollars” rebounding from their weekly/monthly lows, including gold, while Wall Street and European stocks got a jumpstart due to taper expectations
The forex market is caught in an inflation/deflation three-way tug of war between the US outlook, falling covid reopening inflation and a rapidly slowing China. Last night the latest US CPI reading took precedence but the battle is ongoing. DXY fell and EUR rebounded: The Australian dollar was up on all crosses: The falling DXY
Asian stock markets are generally positive again following mild risk taking in overnight markets as the spectre of the US Fed tapering earlier than expected is not really weighing down expectations, offset by the passing of President Biden’s infrastructure plan. The USD gave a little reprieve during the session but undollars are rolling over going
The bond yield back-up of the last few days is starting to add some pressure to forex markets. US yields have been running higher since last week super jobs report: But Australia is being left behind as China slows, commodities roll over and NSW sinks deeper into Delta crisis: For the last week, the US
The continual rise in Treasury bond yields post the NFP print from last week and the Federal Reserves likely tapering response is still putting a dampener on other risk markets, with USD remaining extremely strong against the “undollars”. Euro hit a four month low overnight, not helped by an underwhelming German ZEW survey, while commodity
Forex markets continued recent trends overnight with DXY strong but AUD hanging on. EUR is at the cliff’s edge: The Australian dollar pushed back from the brink and it looks like it’s basing against the weaker crosses: Commodities rallied on the US infrastructure package: As did miners: But not EM stocks: Nor junk: As yields
Asian stock markets are starting to pick up in optimism as the trading week unfold as Japanese markets reopen following the end of the Olympics. Gold remains under a lot of pressure, but hasn’t made a new low during the session, currently at $1736USD per ounce level while Bitcoin continues to outperform after gapping higher