The release of the latest FOMC Minutes combined with the disappointing US durable goods order print saw Wall Street rebound overnight, with intrasession volatility reduced somewhat as European shares got some relief as Euro pulled back slightly in the wake of a stronger USD. The bond market range traded, with the 10 year US Treasury
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.
Asian share markets are rebounding somewhat outside of Japan with risk sentiment improving slightly on overnight volatility. The RBNZ surprised today with a 50bps rate rise, which sent AUDNZD to a three week low as expectations firm for the RBA to play catchup. Other currency markets are seeing some firming in USD with Euro pulling
Wall Street had the wobbles again overnight, led by a steep selloff in tech shares with European shares also unsteady with new PMI surveys coming in under expectations. The bond market saw some strength in response, with the 10 year US Treasury yield pushed down to the 2.7% level, with interest rate markets still continuing
Asian share markets are seeing quite a bit of selling going into the closing sessions as risk taking reverses course yet again, this time on increased concern that both the Fed and ECB are going to hold the line on interest rate rises with Lagarde commenting as such this afternoon. Currency markets are seeing a
DXY was hammered overnight and that reversed all recent trends: AUD up with all things commodities and EM: However, it is still not led by credit which is sign that this is a bear market rally: The Treasury curve steepened: Stocks bounced: Westpac has the wrap: Event Wrap US Chicago Fed national activity survey for April
More Chinese stimulus news has helped buoy risk taking spirits with a healthy start to the trading week on Wall Street overnight, with European shares also rebounding. The bond market saw some weakness in response, with the 10 year US Treasury yield pushed back up to the 2.8% level, with interest rate markets still continuing
Asian share markets are quite mixed as we start another trading week, absorbing the very unsettling finish on Wall Street on Friday night. Currency markets are also clawing back more ground against USD as the Australian dollar firms above the 71 level to make a new weekly high. Oil prices are stabilising with Brent crude
While there was a sea of green across Australian politics on Saturday, Friday night saw Wall Street put in a deep intrasession loss that was then barely filled at the end of the night. This continued high volatility is also translating into a much firmer bond market with the 10 year US Treasury yield again
Yet another bounceback with Asian share markets green across the board today to finish the trading week still unsettled. Currency markets are also clawing back more ground against USD as the Australian dollar firms above the 70 level. Oil prices are stabilising with Brent crude now hovering just above the $111USD per barrel level while
DXY sank last night which is very bad news for the world: AUD dutifully popped: OIl just won’t fall: Metals surged: And miners: EM stocks were not so good: Nor junk: Long bond yields are threatening to stall and fall: But stocks fell anyway: Westpac has the wrap: Event Wrap US existing home sales in April
Share markets are still clutching their pearls over “inflation concerns” with European shares playing catchup overnight as Wall Street put in a scratch session with no new news to further spook equity traders. The bond market however saw more firming with the 10 year US Treasury yield pulling back to the 2.77% level, with interest
Asian share markets did relatively well all things considering after last night’s crash on Wall Street, with losses in the 1-2% range, but still looking very shakey as the recent bounceback in correlated risk markets is over before it started. Currency markets are seeing more ground lost to USD as the Australian dollar has slipped
Well the bounceback is finished and then some with Wall Street collapsing overnight in its worst run in nearly two years, with the NASDAQ losing nearly 5% in a single session. Sell in May and go away anyone? This was all about inflation concerns as the latest UK, Euro and Canadian inflation prints spiked above
Everything but DXY, that is: AUD was pulverised: Oil fell: Metals too: Big miners reversed: EM stocks gave way: Global junk is screaming RECESSION AHEAD: The Treasury curve was steamrolled: And stocks were smashed: Westpac has the wrap: Event Wrap US housing starts in April remained elevated, at an annualised 1.724m (est. 1.756m, prior 1.728m revised
Asian share markets are doing relatively well given the continued bounceback on overseas markets overnight, although Chinese shares are unstable again after a big move higher yesterday. Currency markets are pushing back against the very strong USD although the Australian dollar has slipped back down to the 70 level. Oil prices are also retreating slightly
Last night saw a bigger bounceback on stock markets with both European and US shares properly extending their recent gains, helped by a weaker USD. The reaction to Fed Chair Powells comment on containing inflation, and the latest US retail sales print wasn’t as spooky as expected either, although the bond market saw further weakening
It would probably be more accurate to say that the DXY rocket is taking a breather: CNY bounced: The rest writes itself. AUD, commodities and EM up: But credit is lagging, a bad sign: As yields leap: Stocks took off anyway: Westpac has the wrap: Event Wrap US retail sales in April rose 0.9%m/m (estimate +1.0%m/m),
Asian share markets have had a better response and follow through to the bounces on overseas markets from Friday night, despite a reluctant Wall Street overnight with Chinese shares leading the way after a stumble yesterday. Currency markets are starting to fight back against the very strong USD with the Australian dollar boucning back above
Last night saw a failure to confirm Friday’s bounceback on stock markets with both European and US shares playing the wobbly game amid tension over interest rates and Chinese growth concerns. The bond market moved around only a little with the 10 year US Treasury yield easing off to just below the 2.9% level, with
The DXY rocket eased overnight: AUD took the opportunity to bounce: CNY survived its day of disastrous data: Gold help us all if oil breaks out: Metals were mixed: Miners rose: EM stocks are sick: And junk is still pointing everything down: The Treasury curve flattened: But stocks fell: Westpac has the wrap: Event Wrap
Asian share markets have had a tepid response to the bounces on overseas markets from Friday night, with Chinese shares still spooked by the latest retail data showing the middle kingdom is slowing down appreciably. Currency markets remain constrained by a very strong USD with the Australian dollar reverting from its tiny fightback on Friday
Friday night finally saw a proper bounceback on stock markets after weeks of downside volatility with Chinese shares leading the way into the European session and then Wall Street taking over after desperately trying to find a bottom in the mid-week. While the latest US consumer sentiment figures disappointed, the Fed is still ready to
DXY took a breather Friday night as risk dead cat bounced: AUD screetched higher: Oil too which is self-defeating, self-evidently: Not so much metals: Miners eked out gains: EM stocks and junk too: The Treasury curve steepened: Stocks roared: Westpac has the wrap: Event Wrap US consumer sentiment (Michigan University) disappointed at 59. (est. 64.0, prior
Readers will know that my current base is a global recession sooner rather than later owing to the six shocks hitting the three largest economies: war and energy in Europe, property and OMICRON in China and inflation plus rates in the US. The last is especially important because US inflation is so strong that the