DXY is crashing:
Australian dollar to the moon:
All commodities too:
And miners:
EM stocks are still stalled:
Dash for trash!
Treasuries eased:
Stocks only go up:
Westpac with the data wrap:
Event Wrap
US congressional leaders continued working on the details of a nearly $900 billion coronavirus relief plan in anticipation of unveiling it possibly before the weekend. Senate Majority Leader McConnell, House Speaker Pelosi, Senate Democratic leader Schumer and House Republican leader McCarthy have been directly involved in the negotiations, raising prospects for a package that can pass both the House and Senate.
UK PM Johnson and European Commission President von der Leyen are speaking at 7pm London time to review the state of the negotiations over a post-Brexit trade deal. The European Union’s chief Brexit negotiator, Barnier, said it will be “difficult but possible” to reach an agreement on Friday.
US initial jobless claims rose to 895k (est. 815k, prior week revised to 862k from 852k), while continuing claims dipped to 5.508mn (est. 5.70mn, prior 5.781mn). The rise in initial claims reflected the impact of increased Covid cases and restrictions. Housing starts in Nov. were in line with market estimates (1.547mn, est. 1.535mn) after the fall in Oct. (reportedly due to supply issues), while the surge in permits (1.639mn, est. 1.535mn) yet again underscored the strong performance of the housing sector this year. Philadelphia Fed business survey slipped more than expected to 11.1 (est. 20.0, prior 26.3) led by declines in new orders (2.3, prior 37.9) and employment (8.5, prior 27.2) though the overall stance remains positive. Kansas City Fed manufacturing survey was released early. It surprised with a rise to 14 (est. 9, prior 11), with solid growth cited along with increased investment plans for 2021.
The BoE left its key policy rates and QE unchanged, as was widely expected, while affirming support should it be appropriate. It extended its SME funding support programme (TFSME) by six months to Oct. 2021, while also committing to supporting the economy should EU/UK trade talks end in a no-deal.
Eurozone final Nov. CPI was unchanged from its initial reading of -0.3%m/m and -0.3%y/y, with core CPI remaining at +0.2%y/y.
Event Outlook
New Zealand: Westpac expects that there will be further increases in ANZ business confidence through December. There has been continued positive news regarding vaccine development in recent weeks. There has also been continued strength in the housing market and household spending. Similar themes are likely to be at play in the December ANZ consumer confidence measure. Meanwhile, the November trade balance is set to increase to $250m on stronger exports after October’s drop.
Germany: The December IFO business climate index is expected to ease to 90.0 as lockdowns escalate.
UK: Competing forces will govern the outcome of the December GfK consumer sentiment survey – a rising case count offset by a successful start to the vaccine rollout (market f/c: -31). November retail sales will be pressured by restrictions (market f/c: -4.2%).
The virus curves in Europe and the US are slowly flattening:
US damage is mounting in services:
But industry is protected by the inventory rebuild:
Europe is similar:
But the future is bright!
My base case for the AUD over the next 6-9 months now is:
- DXY to keep falling to 80;
- AUD to match inversely and top out somewhere in the mid-80s;
- as China slows into mid-2021, landing on the European export recovery, and the US booms, DXY to bottom into H2,21.
