The BTFD crowd saved the shenigans on Wall Street with a big follow through of risk taking on Friday night despite a very poor retail sales print, followed by a lacklustre industrial production number. Bad economic news is good stock buying news, so expect some more bounce and kick in the step when markets return
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.
In the usual pattern of recent times, falling US yields bashed DXY lower and lifted commodities plus the Australian dollar. DXY up, EUR down: The Australian dollar jumped but it has taken some damage over the past week: Gold and oil lifted: Base metals couldn’t catch the bid: Nor big miners: EM stocks danced along
Stock markets are on the rebound here in Asia in-line with the BTFD crowd on Wall Street overnight, trying vainly to fill a hole from the impact of the latest US CPI print earlier in the week. The USD is pulling back slightly going into the London session against everything, including gold but definitely not
Oh, really? Tesla & Bitcoin pic.twitter.com/YSswJmVZhP — Elon Musk (@elonmusk) May 12, 2021 Cripes, who could have seen that coming? The world’s pin-up boy for renewable transformation backing out of the world’s most environmentally destructive ponzi-scheme. The funny part about it is, Elon Musk has just increased BTC’s chances of survival, and thus marginally decreased
The BTFD crowd stepped in on Wall Street overnight just after Asian stocks took a hammering in yesterday’s session. The latest US CPI figure had spooked risk markets but last night’s PPI print and some very bullish Fed comments sent traders back to the buy buttons, lifting the risk complex higher. Commodities however were all
More wild action on markets overnight as the COVID recovery lurches through another bubble and bust. This time in commodities. DXY was firm: The Australian dollar remained weak, rallying out of new lows versus USD and slumping against EUR and JPY: Oil fell hard, gold lifted a bit: Base metals tanked: As did big miners:
The inflation bear swatted down stocks on Wall Street overnight as the latest monthly US CPI figure spooked risk markets as it made a 12 year high, boosting bond yields alongside the USD. This confirmed the markets fear earlier in the week that inflation expectations were getting high, and while the Fed looked through the
The bond backup is back and risk assets don’t like it with all kinds of action around the Australian dollar last night. DXY took off: The Australian dollar was pounded against all DMs: Gold was smacked. Oil held: Base metals flamed out: Big miners rolled over: EM stocks look like a suicidal cliff jumped: Junk
Still not a pretty sight across risk markets here in Asia with Taiwanese stocks in near freefall, while other risk assets remain concerned about inflation fears across the US and Europe, with both German and US inflation monthly prints coming in tonight. In crypto land, Bitcoin has bounced back from a short term blip down
While the NASDAQ was unchanged overnight, the risk of the risk complex continued to oscillate into negative territory on inflation concerns with Treasury yields spiking yet again. European stocks joined in on the selloff alongside the broader issues on Wall Street, while the USD was largely unchanged as commodity prices continued their advance. This along
DXY was stable last night: The Australian dollar was also stable: Gold firmed, oil fell: Base metals lifted again: But miners mostly fell: EM stocks were whacked: Junk eased: US yields are rebounding: Which didn’t help stocks: Westpac has the wrap: Event Wrap The Australian Federal Budget surprised with a spending package which is larger than was
Not a pretty sight across stock markets here in Asia in response to the tech wreck on Wall Street overnight, the exception being mainland Chinese bourses and relatively speaking, the local ASX200. The USD is also losing ground across the major currencies after last night’s reversal with gold still holding on well above the $1830USD
Nordea with the note: Only Elon Musk disappointed more than the job report over the weekend (watch the price action in Dog(e)coin, in case you are curious), but some odds effects may be in play currently. Jobs openings are plentiful, but they are just hard to fill due to 1) mobility issues, 2) Covid-fears and
Tech stocks sold off significantly overnight on Wall Street, bringing the rest of the risk complex down as inflation fears reared their ugly head once more, although European stocks escaped most of the carnage. The USD advanced against most of the majors with commodity prices coming off the boil slightly as a result, but most
DXY held its ground last night as EUR rolled over a touch: The Australian dollar pumped and dumped. Its bearish head and shoulder top now has a bullish ascending triangle as well. The battle is joined! Gold firmed. Oil burned: Base metals flamed out: Big miners rallied on. The big Australians have been remarkably weak:
A mixed start to the trading week here in Asia despite the full return of mainland Chinese and Japanese markets and a booming Wall Street on Friday night following the very disappointing US unemployment print which shook up a lot of expectations. The USD is still under enormous pressure with gold extending its gains above
Another US jobs report – the April non-farm payrolls or NFP – came and went on Friday night with Wall Street zooming higher on the very poor showing as the headline number came in way lower than expected, indicating that the Federal Reserve has some time yet before thinking of pulling the interest rate lever.
A fairly staid finish to the trading week here in Asia with a truncated session for mainland Chinese and Japanese markets equating to a bit of catch up and not much else, with the former retracing significantly. The USD is trying to firm here going into tonights unemployment print while gold is trying to build
The US dollar was soft last night as EUR rallied: The Australian dollar moved higher but is still caught in a large head and shoulders topping pattern, a downtrend versus EUR as JPY is breaking out: AUD is now clearly underperforming EMs: Gold flew as US real rates plunge negative, oil is stuck again: Copper
Wall Street zoomed higher on sentiment yet again, with the Dow Jones putting in a record high while European markets were more modest in their rises as the Bank of England kept its composure and interest rates steady, indicating some tapering ahead. The latest initial jobless claims numbers before tonights all-important NFP print was much
The return of mainland Chinese and Japanese markets has resulted in a mix mood across Asia with the ASX200 hit on local COVID problem and macro Chinese problems while a somewhat bullish catchup was played out elsewhere. The USD is still firming against the majors with volatility around the Scottish elections weighing on Pound Sterling
BNY Mellon with the note, catching on with my own views: The Reserve Bank of Australia (RBA) decision this week suggests the central bank remains in a holding pattern. For the bulls still clutching at a few straws, the willingness to hold off making a decision on specific bond purchases suggests that that there is
JPM was last onto this boat but it’s making up for lost time with a new note: Inflation hedging was a big theme in 2010. At the time, the Fed’s Quantitative Easing increased its balance sheet above $2T. Many investors thought it will inevitably lead to inflation. There was a rush to buy commodities, gold
Better economic data from the US coupled with better earnings saw yet another reversal in sentiment on Wall Street overnight but it was shortlived as tech stocks moved lower yet again. European markets bounced back very strongly after the previous selloff while Treasury yields were the only stable risk asset out there. Commodities continue to
DXY was stable last night as its uptrend base has held. EUR was soft: The Australian dollar still has a monstrous head and shoulders topping pattern (yet to break), a gently declining EUR trend but JPY looks likely to break higher: EMs are outperforming AUD now: Oil and gold are new found friends: Base metals
Asian stock markets are still relatively quiet and despite the drubbing on tech stocks overnight on Wall Street and the still closed mainland Chinese and Japanese markets, the ASX200 was able to put in a very solid session. Helped by a lower Austrailan dollar of course as the USD remains strong with Euro dropping fast
The excellent chaps at Nordea with the note: In our sister product, the week ahead, we mulled, if we are not experiencing something akin to a crack-up boom as the Austrian’s (Mises, Rothbard, …) describe it. The latest FOMC decision at least did nothing to assuage such fears – everything is transitory for Powell, it seems. From what
Tech stocks were crunched on Wall Street overnight despite the lack of catalysts, although Treasury Secretary, former Fed boss did spook some by suggesting the Fed needs to raise rates soon. European markets also fell alongside but commodities continued to scream higher – alongside Dogecoin! – with oil up nearly 2% as Treasury yields fell