The Australian dollar strengthened again last night as the DXY fell sharply and the euro rose:
AUD was firm on crosses:
Oil fell, gold rose:
Metals were conquered:
EM shares marked the time:
The trash is okay!
US yields improved slightly:
But big inflation trading looks tiresome as technology prepares for a new breakthrough:
Westpac has packaging:
Transferring an event
German factory orders fell 0.2% m / m in April, falling short of expectations of + 0.5%, although March was revised upward to + 3.9% from + 3.0%. The slight pullback in April does not change the overall picture of Germany’s very strong manufacturing sector.
Sentix Eurozone Investor Confidence Survey Rises to 28.1 (up from the estimate of 25.4, the previous value of 21.0), bringing the index closer to the highs of the beginning of 2018.
Australia: IN NAB Business Overview has jumped 14 pips to 32 in the past 2 months, raising the likelihood of a pullback in the upcoming May update.
Eurozone: The market does not expect any changes in the final version of the 1Q report. Gdp, -0.6% sq. June ZEW Expectations Overview economic recovery in the second half of the year should continue to be monitored.
US: Confidence will be high in May. Small Business Optimism NFIB index (market f / c: 100.9). Strong consumer demand and, as a result, increased imports are likely to play a role in April. trade balance (market price: -68.5bn). april JOLTS jobs will be in the spotlight given the rise in hiring and job openings.
Goldman understands where we are:
The US economy added 559,000 jobs in May and the U3 unemployment rate fell to a recovery low of 5.8%. But the latest employment report fell short of market expectations (which were boosted after an earlier ADP result) and did little to allay fears that supply tensions are holding back labor market recovery. Indeed, US economic activity declined slightly during the month, and the employment-to-population ratio increased by only one-tenth. We expect the report to ease market fears of an earlier-than-expected cut in Fed asset purchases, even if it does not completely eliminate the possibility of a cut announcement in September. The combination of strong expectations from the Fed and a growing global economic recovery should allow the recent dollar weakening to continue. Our preferred option remains long EUR / USD with a target of 1.25. The recovery in economic activity and capital inflows have become a tailwind for the single currency; the bond issue of the Recovery Fund, which is due to start shortly, could also lead to official demand for the euro. The ECB meeting this week will be the next major risk-related event; o our economists expect the governing board to express its opinion on a “significantly higher” rate of asset purchases compared to the beginning of the year. In addition to the euro, a more favorable US real background should also contribute to various EM crosses … EM currencies should benefit in the coming months due to low valuation, interest rate hikes from central bank rate hikes and vaccinations. cyclic reopening.
This is probably still the basic option. Large drops in iron ore and commodity prices on slower growth in China could be briefly cushioned by the continued decline in the DXY due to better data from Europe.
Let’s not forget that AUD has reasonably and well lagged behind Goldman’s iron ore and commodity bubble, so we can expect the opposite for a while as iron ore other deflated simultaneously with inflation in the US and expectations of the Fed tightening.
In the short term, markets will be a problem if the slowdown in China converges with the US fiscal cliff in a growth shock that pushes the DXY higher.
If we manage this unscathed, in a slightly shorter-term outlook, the continued downturn in commodity markets and the recovery in US labor markets in 2022 will still start to lift the DXY as the Aussie dies in the death of a thousand commodity cuts.
In short, I will still use whatever strength of the Aussie is to move more aggressively offshore.