The Australian Dollar’s Absolute Global Whipping Boy

DXY was up last night despite US markets being closed for President’s Day:

The AUD was firm anyway, especially against a falling EUR:

Oil and gold rallied to Ukraine:

So far, European gas has not flowed:

The base metals were mixed:

Emerging market equities were hit:

Junk is weak too:

Treasury bills were offered:

Stocks were closed but Europe fell:

Westpac has packaging:

Event envelope

Eurozone Markit PMI showed a marked increase in service activity with the easing of Omicron restrictions, to 55.8 (est. 52.1, before 51.1). However, the manufacturing PMI beat expectations at 58.4 (est. unch. at 58.7). Markit cited economic resilience to the Omicron outbreak, but also heightened inflationary pressures and potentially more hawkish policy guidance from the ECB as risks to the recovery. German IPP in February was up 2.0% m/m and 25.0% y/y (est. +1.5% m/m and 24.4% y/y). Energy’s annual rise of 66.7%y/y (previously 69.0%y/y) was the main driver, but basic goods continued to rise, at 20.7%y/y (before 19.3% y/y).

British PMIs beat expectations. Manufacturing was flat at 57.3 (est. 57.0), while services rebounded strongly to 60.8 (est. 55.5, before 54.1), the latter helped by easing in pandemic restrictions.

Event Insights

Australia: the RBA Deputy Governor (Capital Markets) Kent will speak to the Australian Financial Markets Association at 12 p.m.

New Zealand : January credit card spending will provide a timely update on consumer spending.

Germany : February IFO business climate survey should signal an improvement in German business confidence given tentative signs of easing supply and omicron tensions (market f/c: 96.5).

WE: of december FHFA Home Prices and S&P/CS House Price Index should post robust monthly gains given the strength of underlying demand (market f/c: 1.0% and 1.1% respectively). February Markit PMI should continue to reflect robust growth in both services and manufacturing (market f/c: 53.0 and 56.0 respectively). consumer confidence will likely remain weak in February given the downside surprise from the University of Michigan survey seen earlier in the month (market f/c: 110.0). Labor supply challenges set to remain a headwind for manufacturing in February Richmond Fed Index (market f/c: 10). the FOMC Bostic will discuss the role of the Fed in the community at a Duke University event.

I don’t know when the market will understand that tough men lie all day, every day. Yesterday was all happy and happy highs. Today is war:

Vladimir Putin has recognized two Moscow-backed separatist regions in eastern Ukraine, hampering prospects for a diplomatic solution to the crisis as he put Russia on a war footing.

In an angry televised speech, the Russian president questioned Ukraine’s statehood and accused the West of using the country as a tool to destroy Russia.

Putin, who devoted long parts of his speech to his version of Ukraine’s modern history, vowed to “punish” those he accused of massacring Russians in Odessa in 2014. He also clarified that his grievances with Kiev extended to the existence of the country in its current situation. form.

It gets worse no better and faster.

Meanwhile, it’s (still) worth nothing that the AUD has taken on the role of extraordinary global scapegoat. Agricultural credit:

The USD remains the biggest long in the G10 FX at present and faced some selling interest last week, mainly driven by IMM flows. Our currency flow data shows inflows from banks as well as outflows from companies, hedge funds and real money investors. The AUD currently remains the biggest short in the G10 FX and has seen mild selling interest in the past week, mainly driven by flows from Credit Agricole CIB. Our currency flow data shows inflows from companies and hedge funds as well as outflows from banks and real money investors.

I don’t see any changes coming. Not unless or until the markets bully the Fed into changing course by lowering even more!

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