By Chris Becker The latest US employment figures on Friday night – aka non-farm payrolls – caused an up-swell of algo trading as the nominally positive result saw risk zoom to new monthly highs across the board, which should encourage even more risk taking here in Asia on the open. Equity markets have now fully
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.
DXY rebounded a little Friday night: The Australian dollar is a one-way melt-up machine: EMs were mixed: Gold was whacked: Oil poured it on: Even dirt joined the party: Miners roared: EM stocks are the gapping wonder of the world: As the virus rips the EM universe apart, its riskiest debt is on fire: The
Heading into tonight’s US non-farm payroll (monthly unemployment) print, Asian stock markets have put on another strong finish to the week as risk sentiment goes back to its excessive highs following an all too brief pause. Non USD currencies are doing well before the report with gold the only undollar not to make any meaningful
By Chris Becker Risk markets finally returned to some semblance of sanity overnight, with stock markets pausing and eventually retreating slightly from their orgiastic excess all week. Meanwhile risk currencies continued to new highs as the USD weakened further, while bond yields also rose in the wake of the ECB increased its asset purchase program
DXY is getting belted now as EUR surges into the Great Fakeflation: The Australian dollar hit new highs last night before pulling back: It is murdering EMs: Gold managed a gain but is still disappointing as DXY falls: Oil marches on: Even dirt raised an eyebrow: Miners blast on: The EM stock bid stalled: But
Stock markets are yet to take a breather after a week of excess with only Chinese markets pulling back ever so slightly. Risk sentiment remains well above macro reality going into tonights ECB meeting with most currencies slipping against USD except gold which has recovered slightly to just above $1700USD per ounce. In mainland China,
By Chris Becker Risk markets continue to transmit the message that the pandemic is completely over, business is back as usual, that there are no macro structural issues at all and earnings are going to be tremendous! European markets surged despite record low contractions in service PMIs overnight as unemployment numbers stabilised, while in the
DXY is still falling as EUR blasts off: The Australian dollar finally flamed out but it’s not over: Gold was bashed despite DXY falls. Odd: Oil took a breather: Dirt is still largely uninterested: Miners flew on: Check out EM stocks. Bizarro world as stocks gap towards Nirvana even as they plunge into the virus:
Stock markets are inflating fast as the lack of any connect with reality and a weaker USD sends them careening back to their overvalued pre-COVID19 valuations. The technical recession in Australia was celebrated with the Aussie dollar almost reaching its start of year high while Brent futures shot through the $40 level on more OPEC+
As the Australian dollar’s unruly melt-up continues let’s revisit what the RBA said yesterday: At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points. The global economy is experiencing a severe downturn as countries
By Chris Becker You can beat protestors, but you can’t beat exuberant sentiment across risk markets overnight with European stocks surging to new highs while Wall Street finished with a flourish despite traders having to drive their Maseratis through broken glass to get to work. The Aussie dollar again outperformed against all the major currencies,
DXY was down overnight as EUR surges: The Australian dollar is wow: Goldis still poised but can’t break through: Oil to the moon: Even first managed a puff of dust: Miners going vertical: EM stocks vertical: Junk vertical: Bonds were soft: Stocks vertical: The AUD is now making stocks look pedestrian: Westpac has the wrap:
Stock markets are once again oblivious to real world macro settings as the Dictator-in-Chief sends the USD plummeting against major currencies at a similar rate of decline of the US standing in the world. The RBA maintained its historically low interest rates, not going negative as many economists are pushing locally, while Bitcoin breached the
By Chris Becker Stock markets continue to diverge from economic reality with Wall Street lifting higher despite rising civil unrest and growing tensions with China over Hong Kong and other trade disputes. The latest ISM manufacturing survey had some glimmer of hope within but still showed extremely weak conditions across the US as unemployment ravages
A modest start to the week as Chinese equity markets react to the wet lettuce rhetoric from Trump on China’s boot on Hong Kong’s neck as most capital cities in the US burn, which should send housewares/DIY/retail stocks up when Wall Street opens later tonight. The USD is falling sharply, particularly against the Aussie dollar,
By Chris Becker Action on markets on Friday night was centered around the US reaction to the Chinese boot on the neck on Hong Kong, with Trump unable to enact anything but hot air in response which calmed stocks on Wall Street somewhat even though the headline Dow fell slightly. The weekend race riots across
DXY was weak Friday night: The Australian dollar is right at the breakout line versus USD: EMs were soft: Gold jumped: Oil jumped: Dirt meh: Miners were strong: EM stocks tried: Junk succeeded: Bonds were bid: And stocks: El Trumpo chose not to confront China over Hong Kong with a range of meek measures that will
A flat end to the week as the window dressing month end meme takes place across risk assets with most stock markets pulling back here in Asia. Besides the usual end of month reshuffle, risk is still waiting Trump’s policy announcement on China, but it seems he’s too busy having a dummy spit about Twitter
By Chris Becker The risk edifice continues to push higher, helped along by a reduction in continuing jobless claims in the US even though all the other economic markers show the world’s biggest economy in a deepening recession. Wall Street stumbled at the finish due to some Trump remarks with US Treasury yields rising slightly,
DXY was weak last night as EUR chases the fiscal package: Australian dollar was weak anyway: EMs were mixed: AUD/SPX correlation had an up day but is trending lower: Gold was firm: Oil too: Dirt is crushed: Except the red magic dirt. Anyone with that is flying: EM stocks are stalled: Junk is euphoric: Bonds
A busy day in Asia with lots of economic reports confirming the impact the coronavirus is having on world economies, with the RBA all but ruling out negative interest rates as the local appetite for capital expenditure falls sharply. Despite the economic reality, the unrelated share market rally’s continue across the region, save for embattled
The Australian dollar is struggling a little this morning: However, it is interesting to note that the AUD has begun to labour a little versus stocks: One wonders if the falling CNY isn’t a carpet that is slowly being pulled from under its feet. It remains at a historic breakdown point: Bonds are still bid:
A mixed mood in Asia despite the orgy of buying still going on in the northern hemisphere with only Japanese stocks advancing on the whiff of more stimulus measures. Meanwhile the Chinese Yuan hit a new low versus USD again, with offshore trading pushing through the 7.17 handle as other majors kept firm against USD
Another new low for CNY this afternoon: The AUD has trended in lockstep with CNY since 2015, though the amplitude of the moves are larger. The AUD can’t charge on in trend term if the CNY goes the other way because the falling CNY hammers EMs and commodities by making China more competitive across the
By Chris Becker The return of Wall Street sent risk sentiment higher overnight as stock markets continued their push to return back to normal overinflated bubble like status before the COVID-19 pandemic. The USD took a big hit against the majors with Pound Sterling back to a two week high and the Australian dollar pushing