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

Australian dollar pounded

au.investing.com/analysis/australian-dollar-pounded-200492552
Australian dollar pounded
By David Llewellyn-Smith   |  Nov 18, 2021 10:27
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The DXY rocket eased up overnight and a seared EUR stabilised:

 

That couldn’t save the Australian dollar which was pounded across the board:

The strong DXY is wreaking havoc with commodities already. Oil was down though Gold up:

Base metals puked:

Bid Iron is onwards and downwards:

EM stocks have rolled again:

Though junk held up:

As Treasury yields eased:

Which boosted GAMMA and nothing else:

Westpac has the wrap:

Event Wrap

US housing starts in October were lower than expected, at 1.52m (est. 1.58m, prior 1.53m) but permits rose to 1.65m (est. 1.63m, prior 1.59m). The slippage in starts was concentrated in the single home (most value-add) sector, with supply difficulties delaying starts. Overall, industry optimism remains strong (as noted in the NAHB survey on Tuesday).

Canadian CPI for Oct was as expected at 0.7%m/m and 4.7%y/y, but the core measures were around 0.1% below expectations.

UK inflation in October was stronger than expected. Headline CPI rose 1.1%m/m and 4.2%y/y (est. 0.8%m/m and 3.9%y/y), with core rising to 3.4%y/y (est. 3.1%y/y). RPI was similarly 0.3% above consensus (6.0%y/y).

Event Outlook

Aust: RBA Assistant Governor (Economic) Ellis will speak at an online CEDA event, 3pm.

NZ: The RBNZ’s Q4 inflation expectations for two-years ahead are expected to push higher, driven by robust domestic activity and ongoing cost pressures.

US: The gradual downtrend in initial jobless claims should remain in place (market f/c: 260k). The November Philly Fed index and Kansas City Fed index will offer a gauge of business conditions in the two regions. Strength in key indicators throughout October should meanwhile lift the leading index from September’s soft result (market f/c: 0.8%). The FOMC’s Bostic, Williams, Evans and Daly are all due to speak at different events.

And Credit Agricole (PA:CAGR) the advice:

AUD: RBA correct on wages growth for now Australian Wage Price Index (WPI) data came out in line with the consensus estimate showing a rise in wages growth from 1.7% YoY to 2.2% YoY. The RBA looks for wages growth to average 2.25% YoY in H221, so today’s outcome is also in line with the central bank’s expectation. The RBA forecasts it will take another two years for wages growth to reach the 3% level it believes is needed for inflation to be “sustainably” within its 2-3% inflation targeting band. Wages growth normally accelerates in Q3 as the annual living wage decision is implemented then and many enterprise bargaining agreements also see wage and salary rises in Q3. Indeed, the ABS notes that over the past ten years, 35-40% of jobs record wage rises in the September quarter. But this year the ABS notes that pay freezes and postponed negotiations due to Covid lockdowns led to this number dropping to just 20%. So, there could be further pent up wage rises in the coming quarters. For now, the RBA is being proven correct on its wage growth forecasts and the next reading for the WPI is a long way off on 23 February 2022. So, the debate between the Australian rates market and the RBA will rage on. The rates market is currently pricing in a cash rate of just below 1% by end 2022 and well above the current rate of 0.10%. The RBA is sticking to its call for no rate hikes until 2024, with some potential for rate hikes in 2023.

Any rate hikes at all are a tail risk in Australia as returning immigration, crashing commodity prices and mortgage resets squash prices for several years at least. The base case is no hikes. The larger risk case is more printing. More from CA:

The AUD saw fresh buying interest last week, predominantly driven by IMM flows. That said, our FX flow data points at hedge fund outflows. The latest squeeze of AUD-shorts has been too aggressive according to our analysis, and the currency is looking overbought relative to its long-term positioning trend.

Subsequently, we have entered a short position in AUD/USD with a target of (+3%) and a stop-loss of (-1.5%). The model remains up 8.89% with a hit ratio of 59% over the past twelve months.

I see nothing but downside for AUD in 2022.

Australian dollar pounded
 

Related Articles

Australian dollar pounded

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 Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
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?
 
Post
 
Replace the attached chart with a new chart ?
1000
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 Investing.com'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
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email