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 sucked into energy bubble implosion

By David Llewellyn-SmithForexOct 22, 2021 09:44
au.investing.com/analysis/australian-dollar-sucked-into-energy-bubble-implosion-200490288
Australian dollar sucked into energy bubble implosion
By David Llewellyn-Smith   |  Oct 22, 2021 09:44
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

DXY rebounded last night and EUR sank:

 

Australian dollar was bashed:

Oil fell. Gold is dead:

Base metals were slaughtered:

Big miners cremated:

EM stocks weak:

Junk weaker:

As yields lifted but the further out you go the flatter the curve:

Which drove Growth:

Westpac has the wrap:

Event Wrap

US initial weekly jobless claims fell to 290k (est. 297k, prior 296k), with continuing claims also lower at 2481k (est. 2548k, prior 2603k).

The Philadelphia Fed business survey disappointed at 23.8 (est. 25.0, prior 30.7). While sentiment should revert back towards more historically typical levels into 2022, it should remain elevated due to support from factory efforts to rebuild inventories.

The leading index for September rose 0.2% (est. 0.4%, prior 0.8%) to a record high. Components were mixed, with six making positive contributions, led by ISM new orders, while four gauges declined, led by building permits.

Existing home sales beat expectations, rising 7.0% in September (est. 3.7%, prior -2.0%). Sales have been choppy this year amid record high prices, record low inventories, low but rising mortgage rates, and the pandemic’s migration to the suburbs.

FOMC member Waller said that inflation risks are to the upside and the FOMC might have to respond faster if price pressures remain too high. The next few months will be critical for his inflation views, he added.

Eurozone consumer confidence slipped to -4.8 (est. -5.0, prior -4.0).

Event Outlook

Australia: RBA Governor Lowe participates in an online panel at Universidad de Chile’s Conference on Central Bank Independence, Mandates and Policies.

Japan: The October Nikkei manufacturing PMI is likely to reflect continuing global supply chain disruptions, whilst the October services PMI will highlight a lagged recovery versus other developed markets.

Euro Area/UK: The October Markit manufacturing PMIs for Europe, the UK and Germany are also likely to be affected by the global supply chain. The October services PMIs should remain robust with delta less of an issue for the region. UK consumer sentiment is expected to remain well above recent lows despite late September’s fuel crisis. September retail sales will again be burdened by the shift from goods to services as the UK reopens.

US: The October manufacturing and services PMIs are expected to print at healthy levels despite global uncertainties and delta being a higher risk to activity in the US. The FOMC’s Daly will speak on the Fed and climate change risk.

The key driver of the evening was the imploding energy bubble in China. It sucked in the entire commodity complex given if China has enough energy then it will begin to produce enough metals.

Thermal coal was slain:

Coking coal butchered:

Even JKM and TTF caught the downdraft:

It looks to me like the coal bubble is over. It may take a few months to fully deflate and weather could still play a role but China has got it by the throat via booming domestic production and surging imports. Stand by for an enormous coal glut in 2022.

Gas is still more complex. Vlad Putin is keeping the pressure on:

Russia can increase gas supplies to Europe as soon as Germany approves the new Nord Stream 2 pipeline, President Vladimir Putin said, underlining Moscow’s conditions for help to resolve the continent’s energy crisis.

Putin said Gazprom (MCX:GAZP), the Kremlin’s gas monopoly, could increase flows by an extra 17.5bn cubic metres via the new pipeline “the day after tomorrow” if regulators approved it “tomorrow.”

The amount, equal to roughly 10 per cent of the gas Russia shipped to Europe and Turkey in 2020, would provide significant additional supplies at a time of record prices in Europe, even before the pipe’s second line is fully filled in December.

Not much mucking around there. This one is the lap of the gods.

As the energy bubble deflates, freeing Chinese metals processing just as its construction collapses and bulks crater, the global economy slows as spending shifts from goods to services, supply-side bottlenecks ease and the Fed tapers, the base case is that Goldman Sach’s careful nurtured commodities bubble is going to implode spectacularly across 2022.

Does that sound like a good bet on the AUD to you?

Australian dollar sucked into energy bubble implosion
 

Related Articles

Australian dollar sucked into energy bubble implosion

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