Credit Agricole with the note: The stronger than expected NFP report on Friday boosted the USD across the board as it seemingly helped the Fed move closer to QE taper and policy normalization. Indeed, the data likely alleviated some of the officials’ recent worries that a jobless recovery in the US could compromise their inability
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.
Cross-posted from FTAlphaville: Ousmène Jacques Mandeng is director of advisory boutique Economics Advisory Ltd and a Visiting Fellow at the School of Public Policy of the LSE. He currently works on a number of leading central bank digital currency (CBDC) projects and other blockchain-related payments applications. Here he explains why calls for stable coins hark
Treasury bond yields continue to rise in the wake of the great-but OMG taper could be coming sooner – NFP print on Friday night with Wall Street and European stocks hesitating, not helped by the opposite of progress (aka Congress) in getting an infrastructure spending package done in the US. Risk currencies continue to flounder
Forex markets are readying another hammer blow for the Australian dollar as Fed taper warms up with Chinese slowing to create a perfect storm. DXY is close to a 2021 breakout: The Australian dollar is a few pips above 2021 breakdown: All commodities are under pressure: Big miners dug their heads into the sand: EM
Asian stock markets start the new trading week in mixed fashion following Friday nights stellar US unemployment print with undollar assets continuing their falls while Japanese markets remain closed following the end of the Olympics. While Bitcoin shot 10% higher on the open to a three month high, gold was flummoxed by a huge gap
Some big capitulations from Goldman over the weekend as reflation and commodities bull market fall apart. First, yields: Revised yield forecasts show 10y USTs at 1.6%, 10y Bunds at -0.15% at YE21. Factors currently weighing on yields should fade, allowing for some normalization, though rebound to much higher levels may take longer than previously expected.
Asian stock markets are finished the week in a somewhat mixed fashion as traders position themselves for the US unemployment print later tonight. Risk currencies are pulling back slightly as the USD strengthens with gold teetering on the key $1800USD per ounce support level: The Shanghai Composite is once again looking very week, currently down
Wall Street put in new record highs as the wobbly nature of risk markets for the past few weeks finally relented with an ebb to the upside. The latest Bank of England meeting was a bit of a fizzer with sovereign bond yields rising slightly alongside unimpressed currencies as Old Blighty remains steady as she
Asian stocks markets are having another mixed session as we head into the end of the trading week, not helped by Chinese stocks resuming their tech selloff, local shares recoiling from yet another lockdown while Wall Street wobbles on another Fed hawks comments. The volatility in currency markets is subsiding a little from last nights
A strange one-two punch overnight on the back of US economic prints, namely a disappointing private jobs data print and then a booming service PMI, all wrapped in a nice ball by the latest round of Fed hawkish comments sending Wall Street lower and currency volatility through the roof. Never a dull moment! Treasury yields
A bit more calm has returned to Chinese equity markets although Japanese stocks are still having the wobbles following more COVID problems in Tokyo, but generally, Asian risk markets are having a good mid-week session that should translate to further gains tonight with Eurostoxx futures rising. Bitcoin is still deflating having pushed below its own
Equities bounced back on Wall Street as corporate earnings overshadowed everything else, although stronger US factory orders and more Fed talk supporting a gradual taper helped as well. Treasury yields however spell out the better picture and remain down at multi month lows while currency markets saw a big of USD strength eke back in.
Forex markets were largely calm on August 4, 2021. The stubborn RBA lifted AUD but everything else stayed the course. DXY was firm as EUR eased: AUD lifted across the board. There is a base forming in AUD/USD that could be construed as short term bottom: Gold and oil sank: Base metals too: Big miners
The good start to the trading week as stumbled already here in Asia with the fallout from last nights US ISM manufacturing print and growing concerns over COVID spilling over once again as equities pullback. Bitcoin is following the risk mood, struggling to gain traction after the false breakout to start the week as the
Goldman with the note. Neutral DXY, long EUR and short JPY is classic risk on positioning for forex. If a growth scare takes flight then the safe-haven flows will be violent: In the week ending July 27, non-commercial traders added $2.7bn to USD net length. In the previous week, after net purchasing $4.4bn USD, non-commercial
A big retraction in Treasury yields overnight on the back of a disappointing US ISM Manufacturing print saw Wall Street give pause while commodities sold off sharply. Currency markets were little changed again, with WTI and Brent crude falling more than 3% while gold prices remained just above the $1800USD per ounce level. Bitcoin has
Markets are beginning to send signals of increasing distress. The global growth scare is building and policymakers are behind the curve. DXY was stable as EUR fell: The Australian dollar lifted a little on the pretense that China is stimulating which is isn’t: Gold was stable but oil weak: Base metals too: Miners were mixed:
A much better start to the trading week here in Asia as Chinese tech stocks rebounded after last week’s bloodbath. The weekend gap has seen currencies basically unchanged, although Bitcoin is finding some life later in today’s session, oscillating around the $40K level. Meanwhile gold is continuing to deflate from its Friday high nearer the
Nordea with the note: If the Doves wanted an excuse to postpone all taper talk, then they needed to look no further than the Delta strain, yet the Fed refrained from using it as an excuse. Sometimes the things that are left unsaid are the most important. At the press conference this week Powell also
Corporate earnings were supposed to give Wall Street a lift on Friday night but some cautious revenue estimates from big tech saw a continuation of the risk off mood that has been gripping Asia most of the week due to the Chinese tech stock selloff. Currency markets were little changed after the mid week reversal
Forex markets reversed weekly moves on Friday with DXY suddenly strong on what looked suspiciously like safe-haven buying as risk assets struggled. EUR fell: The Australian dollar was bashed against all major DM crosses. It is already hurtling to new lows versus EUR: Commodities largely reversed downwards (except oil): Exuberant miners woke in fright: EM
MUFG with a solid take on AUD: USD continues to correct lower as Fed fails to deliver another hawkish surprise29thJuly2021USD: Gradual QE taper plans encourage further correction lower for USD The US dollar has continued to correct lower following last night’s FOMC meeting with the dollar index falling further below the intra-day high of 93.191
Forex has interesting again as the US dollar is suddenly weak throwing up a range of consequences. EUR took off: Australian dollar rose but much less than DXY fell and it kept falling against the crosses: Commodities rose: Big miners are powering into the building iron ore correction: The China stick save lifted EM stocks:
Key GDP and unemployment data in the US overnight put paid to the idea that the Fed may still be hesitant to normalise interest rates with the USD falling back against all the majors while Wall Street remained elevated. Commodities all rose in response to the weak USD with gold surging strongly above the key
The latest FOMC meeting did not translate into a lot of volatility overnight with Wall Street largely unchanged while Treasury yields eventually clawed back some intrasession gains due to the lack of an outright tapering signal. Currency world saw more volatility with Euro ranging through nearly 80 pips while the Aussie had similar volatility but