Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Australian Dollar Rides the Energy Panic

By David Llewellyn-SmithForexSep 28, 2021 09:45
au.investing.com/analysis/australian-dollar-rides-the-energy-panic-200487989
Australian Dollar Rides the Energy Panic
By David Llewellyn-Smith   |  Sep 28, 2021 09:45
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

DXY was up overnight as EUR fell:

 

The Australian dollar was strong anyway:

The key was energy. Oil exploded:

Thermal coal exploded:

LNG exploded:

Coal adds to Australian income but oil and gas do not. They basically offset one another in the terms of trade.

Base metals were soft and why wouldn’t they be. This energy shock is going to hammer the global economy:

EM stocks still look precarious:

The EM junk siren is howling a warning:

As Treasuries back up though the long end has slowed:

And stocks sold led by duration stocks:

Westpac has the wrap:

Event Wrap

US durable goods orders in August rose +1.8%m/m (est. +0.6%m/m, prior raised to +0.5%m/m from -0.1%m/m), with the ex-transport measure softer at +0.2%m/m (est. +0.5%m/m).  Supply constraints featured once again. The Dallas Fed manufacturing survey, at 4.6, missed expectations at 11.0 (prior 9.0). Lower new orders and outlook were the main cooling components in a still robust report.

FOMC member Williams said good progress has been made on the inflation and job goals and hence reducing the pace of bond buying may “soon” be warranted. But the conditions to support rate hikes still lie well in the future, with long-term inflation expectations remaining relatively stable. Brainard said she expects the conditions on the labour market to be met soon, allowing bond purchases to be tapered, but added that there’s no signal from that for the timeline for rate hikes. Evans shifted to a more hawkish tone regarding tapering: “If the flow of employment improvements continues, it seems likely that those conditions will be met soon and tapering can commence”, but regarding rate hikes: “Future decisions regarding the path of short-term policy rates seem much less clear to me at the moment”, advocating a sustainable moderate overshoot in inflation.

Bank of England Governor Bailey repeated comments from the recent meeting minutes to clarify that unwinding stimulus should come from an increase in the Bank Rate that could occur even before the end of their APP (to cease at end 2021).

Event Outlook

Australia: Westpac anticipates a 1.5% decline (market at -2.5%) in August retail sales given restrictions intensified across the major states over the period. However, basic food spend, ~40% of retail consumption, likely outperformed over the month, partially offsetting declines in covid-affected categories. The Q3 AusChamber-Westpac survey will provide a timely update on Australia’s manufacturing sector; particularly significant for this edition will be the impact of current restrictions on hiring and investment.

New Zealand: The employment indicator for August should show limited impact from the latest Covid lockdown.

UK: September nationwide house prices may lose momentum on stretched affordability and the tax break expiry (market f/c: 0.6%).

US: Wholesale inventories are due for a rebuild, however supply constraints are a headwind (market f/c: 0.8%). The July S&P/CS home price index is expected to see a further acceleration in annual price growth to around 20.0%yr. Delta’s resurgence stands as a headwind for September consumer confidence index (market f/c: 115.0). Chair Powell and Secretary Yellen will appear before the Senate Banking Committee. The FOMC’s Bullard and Bostic will also speak.

We are now in a full-blown global energy panic. It is not overly beneficial for the Australian dollar given it is bullish at the margin for DXY, especially since the US already has the highest inflation rate and a tapering Fed that will get more hawkish.

If we roll on much longer here, and/or get a bad northern winter, the global economy is on the verge of a major energy crisis until demand destruction is enough to crash prices.

Given China is already shutting down which will take down European industry quickly, and the US is slowing, that will not take very long.

2008 might be the right comparison. Not 2015.

Australian Dollar Rides the Energy Panic
 

Related Articles

Australian Dollar Rides the Energy Panic

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