By Chris Becker The risk tone for the next month was set high and positive on Friday night as the latest US jobs report – the non-farm payrolls or NFP – beat expectations and previous prints were revised higher. This was offset by a disappotining manufacturing PMI print but nonetheless, US Treasury yields jumped alongside
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 fell again Friday night but can still fall another goodly distance before threatening its uptrend The Autralian dollar was up against DMs: But EMs were stronger: AUD shorts are near the least since the start of 2019 at -40k contracts on CFTC: Gold looks more constructive: Oil rose: Metals too: And miners: EM stocks
Today’s private PMI manufacturing print in China, combined with some stimulus talk in Japan and the usual “must cut rates” talk locally is seeing a small boost to Asian risk as we end the week, but not the trading session overall as more prudent traders wait for tonights US NFP. The Aussie dollar has come
DXY was soft again last night: But the Australian dollar flamed out anyway versus DMs: EMs fell much harder: Gold looked better: Oil fell: And metals: Plus miners: And EM stocks: Along with junk: Bonds are back: Stocks fell: Westpac has the wrap: Event Wrap Media (Bloomberg) reported, citing “Chinese officials”, that US-China trade negotiations beyond Phase
By Chris Becker Stock markets are taking a hit due to a triple whammy of events overnight, namely the impeachment inquiry vote in the US Congress, the stalled trade talks with China and the disappointing inflation data coming out of the PCE print. Wall Street has lost confidence coming up to the non-farm payroll/unemployment print
Its the end of the month combined with the fallout from last night’s (early morning!) FOMC meeting and subsequent rate cut has been somewhat restricted to currency markets, but mainland Chinese stocks are pulling back in the wake of the disappointing PMI print, as the overall mood remains somewhat mixed. The Shanghai Composite fell gain
By Chris Becker Risk markets are still in a holding pattern awaiting the Federal REserve latest interest rate meeting, with the focus on German unemployment – spiking unexpectedly – and US GDP growth which disappointed looking through the headlines. A big reversal and increase in oil inventories sent both WTI and Brent down to weekly
It’s all about the Fed as traders await the FOMC meeting tomorrow night with Asian stocks slipping alongside Wall Street overnight. An election in mid-December in the UK is keeping currency volatility high, although the Aussie brushed aside today’s CPI print, Swiss Franc and gold are falling going into the City open. The Shanghai Composite
DXY was down last night as EUR lifted: The Australian dollar was universally strong: Gold fell: Oil fell: Metals did better: But not miners: Nor EM stocks: Junk was mixed: Bonds were bid: Except Australia: And stocks fell: The big driver on the night was Brexit, via the BBC: Boris Johnson’s 12 December election plan
By Chris Becker Quite a mixed night on overseas risk markets with European bourses slipping into the red while Wall Street is just holding on as tech stocks sell off slightly amid worse than expected corporate results. Bond yields have fallen across the curve but also across all sovereign releases with the Australian dollar the
Despite a very positive lead from Wall Street overnight, Asian equities fell back in the main, with Aussie stocks treading water for the second day in a row. The USD fell back against Yen and the Aussie, the latter on a run due to Governor Lowe’s comments on interest rates this morning, while gold and
DXY was soft last night as EUR firmed: AUD was up against DMs: EMs were even stronger: Gold sagged: Oil too: Metals were happier: Miners strong: EM stocks are breaking out: US junk is threatening to: All bonds eased: As the S&P500 flew to record highs: The news flow was dominated by more trade non-deal
By Chris Becker US stocks have surged to record highs on the hopes that trade talks will bear fruit soon with an official extension to Brexit stabilizing European markets. Gold fell below $1500USD per ounce while Bitcoin remains under $10,000 as USD lost ground against Euro and the Aussie dollar in the risk taking mood.
A solid start to the week here in Asia, outside Australian stocks, with risk markets pushing higher from Friday night’s solid session on Wall Street and more weighing up on Brexit. Bitcoin has surged to a new high on comments from Chinese authorities on blockchains, while gold is holding steady above $1500USD per ounce as
Via Banking Day: Australian banks “face greater pressure to their profits” a Treasury briefing for their minister, Josh Frydenberg, explains. Or at least they will be under even stiffer pressure if and when quantitative easing unfolds in Australia. Some dare to guess this may be as soon next week. In any event, QE with dinkum
DXY continued its recovery Friday night as EUR sank: The Australian dollar was soft against the USD: Weak against EMs: Gold tried but failed: Oil lifted as the US rig count tumbled: Metals were mixed: Big miners were firm: EM stocks too: And US junk, EM not so much: All bonds eased: As stocks galloped
Stocks are flatlining alongside currency markets across the region – if you look outside local risk markets – as the Brexit and US induced earnings swings from overnight dissipate into nearly nothing in terms of risk taking. Gold is steady above $1500USD per ounce, but not advancing while the Yuan remains in a holding pattern,
By Chris Becker Tech stocks lead the way on Wall Street overnight as solid earnings overshadowed the ECB rate meeting which ended up a fizz with no substantive change. Commodity prices rose with gold particularly getting out of its funk, with oil prices continuing to move higher after breaking out post the latest inventory report.
DXY was up again last night as EUR sagged: The Australian dollar sank against DMs: And EMs: Gold was strong: And oil: Plus metals: But not miners: Em stocks are trying: As junk celebrates: Treasuries were bid: And bunds: Plus Aussie debt: Stocks ground upwards: It was PMI night and it told the tale. Europe
Stocks are advancing across the region here in Asia although mainland Chinese stocks are struggling to make ground, as positive sentiment from US earnings overnight (notably Tesla and Microsoft) and a lower USD keeps risk spirits going. Commodity prices remain stalled as the oil price lifted overnight with bond yields also steady going into a
By Chris Becker European stock markets led the charge overnight as Wall Street was relatively flat, despite a big lift in oil prices as US inventory data surprised to the downside. Other commodities were largely unchanged with gold not moving alongside iron ore while the USD weakened against most of the majors with Pound Sterling
DXY was up again last night: The Australian dollar pulled back against DMs: And EMs: Gold was stable: Oil up: Metals too: And most miners: EM stocks are still poised: Junk was softer: Treasuries bid: And bunds: Aussie bonds most of all: Stock were flat: Westpac has the wrap: Event Wrap US Pres. Trump announced the
Chinese bourses are dragging down the risk sentiment into a defensive mode given the late poor lead on Wall Street overnight, as the Brexit drama rolls on again. The possibility of an extension to Brexit to even early next year is providing a little bit of hope but both Euro and Pound Sterling are steady
By Chris Becker Overnight risk markets were relatively stable due to the absence of any major catalysts or economic news, although Wall Street wilted later in the session as European stocks tread water. Only Pound Sterling stood out on currency markets, dropping as the UK Parliament voted for Brexit once more while bond yields also
DXY recovered some poise last night as EUR reversed: As is common, the AUD followed EUR: It took a beating vs EMs: Gold is hanging on: Oil was firmer on OPEC bluster: Copper fell: Miners lifted: With EM stocks: And junk: As Treasuries were bid: And bunds: Plus Aussie bonds: Stocks eased: Westpac has the
A sea of green on stock markets across Asia although not as substantial as that on overnight markets, with Japanese bourses closed for a holiday providing a muddy picture to overall sentiment. Commodities were relatively weak while currencies tread water as USD gained slightly. The Shanghai Composite was floating along and looked set to put
DXY was a bit stronger last night as EUR fell: The Australian dollar didn’t care, bid higher versus DMs: And EMs: Gold was soft: Oil too: Metals were better: And big miners: Plus EM stocks: Junk spoiled the party: As Treasuries were sold: And bunds: Aussie bonds followed: Stocks still looked poised for breakout: Westpac
By Chris Becker The USD gained strength overnight, with equity markets moving higher in Europe and then dragging Wall Street along with it as Trump suggested/lied about a possible “new” deal with Chyna. The Brexit chaos continued however, with Pound Sterling falling back on a possible confirmation of a delay on the exit, but its