AUD facing growing headwinds

Posted on September 20th, 2017

The outlook for the AUD is facing bigger headwinds. Chinese economic growth has slowed in recent months, and iron ore and met-coal prices are weaker over the last month.  It appears that steel prices in China have turned over as fixed asset investment slows and steel inventories start to build; albeit from low levels.  The […]

Fed on the QT, market still digesting the BoE rate guidance

Posted on September 19th, 2017

Even though the Fed’s QT starts gradually, the market may react to the prospect of it increasing in pace and resulting in a significant additional supply of bonds over the next two to three years.  ECB and BoJ QE may have delayed the impact of impending QT on yields, but the ECB is expected to […]

This Time Trump? – Scope for USD rebound

Posted on September 14th, 2017

The US administration is all about tax reform, sending a disciplined message, and approaching Democrats to gain more bipartisan support for its agenda.  US yields have rebounded from a low for the year at the end of last week.  They may continue to rise in light of the stronger than expected US economic data in […]

New Zealand Election still hangs in the balance; Preview of Australian labour data

Posted on September 13th, 2017

The Australian business survey was mixed, but showed significant improvement in labour components, suggesting upside risk for the Australia labour report out on Thursday.  The latest New Zealand poll suggested that the chances of a return in the National government have increased greatly.  However, a closer look at the trends and betting odds suggests the […]

USD reprieve, but a lot to prove, NZD facing economic and political headwinds

Posted on September 12th, 2017

USD had a reprieve so far this week after hitting new lows for the year last week.  However, EM currencies, in particular, have held most of their recent gains and retain their uptrend.  We see some risk of a correction in EUR from an over-bought condition.  After two weeks of consolidation in AUD/NZD, we see […]

Populist pandering hurts the dollar; Emerging Markets powering on

Posted on September 8th, 2017

USA politics appears to be descending steadily into a quagmire of dysfunction, contributing to a weaker and more uncertain US economic outlook.  The USD has clearly broken its base since 2015, leaving investors wondering where the bottom is. The sliding USD has developed a life of its own that may be hard to stop.  The […]

Bank of Canada could surprise again

Posted on September 6th, 2017

The BoC rate decision tomorrow is a line ball call.  The output gap model suggests getting a hurry on because the economy is moving into excess demand and rates are far below neutral.  Recent consumer, housing, and labor market data also support getting on with hikes.  Some more recent, albeit modest, ebbing in business activity […]

Australian Govt infrastructure boom is leading private capex recovery

Posted on September 1st, 2017

Q2 Australian construction work done surged on Wednesday by a record.  While lumpy work at an LNG project drove this increase, the data also showed strong growth in public infrastructure spending.  The capital expenditure survey increased for the year ahead by the biggest margin since the mining boom; this time led by the service sector.  […]

Trump in his element responding to Harvey

Posted on August 30th, 2017

North Korea and Hurricane Harvey are dominating attention in the market. The market is bracing for some disruption to the US economy.  Gasoline prices in the US have surged for the front two contracts, adding to near term US economic disruption and uncertainty.  US rates and yields are off their lows on Tuesday, but are […]

Bear claws dig into the US dollar

Posted on August 28th, 2017

The persistent bear-trend in the USD this year showed its claws last week with fresh lows in the Bloomberg dollar index since January-2015. It’s not just about the rebound in the EUR, EM currencies and equities are significantly out-performing.  Monetary policy is no longer diverging, the Fed is shifting from rate rises to quantitative tightening, […]