Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Australian dollar court jester whipped by the King
Australian dollar court jester whipped by the King
By David Llewellyn-Smith   |  Apr 07, 2022 09:30
Saved. See Saved Items.
This article has already been saved in your Saved Items

DXY is the King:


AUD the court jester:

Oil may be beginning to sniff out the start of global recession:

Metals not so much:

EM stocks (NYSE:EEM) fell further:

US junk (NYSE:HYG) was smoked as EM held on:

The curve actually steepened for once:

But stocks were hit again:

Westpac with the wrap:

Event Wrap

The FOMC minutes from the March meeting provided details on the proposed unwinding of the QE program. Bonds would be sold at a pace of up to $95bn per month, comprising up to $60bn treasuries and $35bn mortgage-backed bonds. This pace is about twice as fast as the previous unwinding of QE in 2017-2019. Regarding rate hikes, “many” officials had favoured a 50bp hike in March but were dissuaded by the uncertainties over the Russian invasion of Ukraine. Overall, the minutes were no more hawkish than had already been priced in by the markets.

Eurozone PPI in Feb. rose 1.0%m/m and 31.4%y/y (est. +1.2%m/m and 31.6%y/y).

UK announced further sanctions on Russia, freezing assets of Sberbank, Credit Bank of Moscow, and another 8 oligarchs, as well as seeking to end all imports of Russian coal and oil by end 2022.

Event Outlook

Aust: A widening of the trade surplus is anticipated for February as strong exports earnings continue to outstrip gains in imports (Westpac f/c: $13.2bn).

China: Authorities seem comfortable with the renminbi’s value, with foreign reserves expected to remain stable in March (market f/c: $3199bn).

Eur: Recent inflationary pressures are set to dampen the short-term outlook for retail sales (market f/c: 0.5%). The ECB minutes from the March meeting will be released.

US: Initial jobless claims are set to remain at a very low level (market f/c: 200k). Demand for consumer credit should meanwhile remain robust in February as pandemic savings continue to be worked down (market f/c: $18.1bn). The FOMC’s Bullard will discuss the economy and monetary policy; Bostic and Evans will then speak at a different event.

Credit Agricole (PA:CAGR):

King USD has received a boost of late especially vs the beleaguered EUR, CHF and JPY, which are still haunted by the stagflationary effects of the war in Ukraine. That said, the USD continues to lag the high-yielding currencies of global energy exporters like the AUD, CAD and NOK. We have argued that there are at least two reasons for the bifurcated USD performance. The first is the fact that, despite the latest market wobbles, global risk sentiment remains resilient and this continues to fuel demand for high-yielding USD proxies. In addition, the aggressive flattening (and, until recently, the inversion) of the UST yield curve (using UST 2-10Y) seems to further reduce the investment appeal of the USD at a time when US real rates and yields remain deeply negative. In addition, an increasing number of clients have been discussing the prospects of reduced appetite for the USD from central banks from here, especially if the global economy splinters into political and trade blocs that use liquid USD-proxies to settle transactions. Moreover, some clients are arguing that countries that are unhappy about the role of ‘Global Sherriff’ played by the US could seek to reduce their USD exposure as a way to safeguard the independence of their own foreign policy. On the day, focus will be on the minutes from the March FOMC meeting as well as a speech by the Fed’s Patrick Harker. Many positives seem to be in the price of the overvalued and overbought USD, and we think that the USD can only broaden its gains if the combination of geopolitical, stagflation and monetary tightening risks deals a lasting blow to risk sentiment in the near term.

Perhaps. My view remains that a DXY blowoff that crushes everything in its path is dead ahead as a global recession panic takes hold.

Australian dollar court jester whipped by the King

Related Articles

David Jones
Euro Bounces Off The Magic Number By David Jones - Jul 16, 2022 2

There is a “groundhog day” feeling to financial markets as the same issue continues to concern investors - resulting in similar moves in certain markets. Of course, the...

Australian dollar court jester whipped by the King

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email