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Morning Call – THE GLOBAL RECOVERY IS REAL, So why is the Aussie Dollar down
Topic Started: 3 Dec 2013, 09:42 AM (2,353 Views)
peter fraser
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MORNING CALL – THE GLOBAL RECOVERY IS REAL, SO WHY IS THE AUSSIE DOLLAR DOWN
Greg McKenna
Read it all here.

Recap- The global data flow of Purchasing Managers Indices showed an economy in recovery mode. Pretty much every major jurisdictions either matched or exceeded last months numbers and the UK and the US in particular stand out as very strong results with the UK PMI printing 58.4while the ISM in the US was 57.3. Both were much stronger than expected.

- But this is a market where good economic news is likely to put the breaks on Fed, Bank or England and or ECB monetary largesse so stocks didn’t take the solid PMI releases that well.- At the European close the FTSE was down 0.84% to 6,595, the DAX was down just 0.04% the CAC fell 0.21% but stocks in Milan and Madrid came under heavy selling falling 1.52% and 0.93% respectively.-In the US the Dow is down 0.48% to 16,009, the Nasdaq off 0.37% to 4,045 and the S&P has just lost 5 points toward the end of day and sits back at 1801, down 0.27%. Watch out for headlines if they all manage to slip back below these much hyped levels.

- On the ASX this morning at 8am AEDT the Dec SPI 200 contract is down another 24 points to 5,260 as the decline accelerates. Dec 3 and 10 year bonds are down 2 points each. - On global FX markets the US dollar got a little bit of its mojo back from the strong ISM figures with USDJPY now above 103 and on its way to 104 at least.

The Aussie was hit back from strength which saw a high at 0.9168 and traded down to a low of 0.9086 early this morning. It now sits at 0.9102. GBP is off a high of 1.6442 (not a typo) back at 1.6352 this morning and Euro sits at 1.3541 after a brief foray above 1.36 at one stage.

-What a wild ride Bitcoin was in our time zone yesterday. Early doors down below $850 and then back up above $1100 later in the day and it sits at $1078 this morning. Amazing ranges and price action

– instability reigns. It seems to reign in the gold market as well with the yellow metal falling more than $30 to $1219 oz just when it looked like it might have found support in the $1240/50 region. Silver lost 4.23% to $19.14 Nymex crude rallied $1.25 to $93.97 (Australian petrol prices on the up with the Aussie down) and copper sat at $3.22 lb. On the Ags corn was 0.30% higher but wheat and soybeans fell 0.8% and 1.2% respectively.

ON the data front it is another big day for Australian traders with retail sales and the RBA Board meeting. No one expects the RBA to move rates but the language around the economic stimulus and the Aussie dollars level will be interesting to traders trying to read the tea leaves.

Elsewhere we get the Chinese non-manufacturing PMI, house prices and construction PMI in the UK, New York ISM in the US along with the Redbook index and the IBD economic optimism index.The above first appeared in my Business Insider post “20 seconds” this morningWhat’s up with the Aussie dollar?

The RBA’s intervention and jawboning in the FX market was a big part of the Aussie’s fall over the month of November and with the RBA Board meeting today I guess there will be some fears that the Governor hooks in again. Of course he might but as the NAB FX guys wrote yesterday much of the selling and the RBA sentiment is baked in the cake and it might be time for a bounce.

I’ve gone long this morning at 0.9104 as you can see on the chart above – I stayed away from the buying yesterday and my stop is below the big trend line that stretches back to the 2008 low. This is a big picture play so it might take some time to work through but if the global economy is really starting to heal and if Chinese growth is going to be stronger then many expect then the RBA and its Governor have done a great service to the Australian economy in jawboning the Aussie lower so that any rally has a lower start and end point.

Gold – right on long term support

So yesterday I contemplated buying some gold – thankfully I did not, yet anyway
Any expressed market opinion is my own and is not to be taken as financial advice
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Dr Watson
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Peter, you've been linking to articles calling the global/US recovery for some time now. If it is true then shouldn't the Fed be taking away the punch bowl?

I think we should remain sceptical for as long as the punch bowl remains on the table.

The global recovery is NOT real until then.
Edited by Dr Watson, 3 Dec 2013, 09:49 AM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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peter fraser
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Dr Watson
3 Dec 2013, 09:47 AM
Peter, you've been linking to articles calling the global/US recovery for some time now. If it is true then shouldn't the Fed be taking away the punch bowl?

I think we should remain sceptical for as long as the punch bowl remains on the table.

The global recovery is NOT real until then.
and Greg McKenna (ex MB) was pessimistic until recently. the reason that stock prices fell along with gold is that the numbers are looking good, which means as you predict that the punchbowl will be taken away very shortly if these numbers persist.
Edited by peter fraser, 3 Dec 2013, 10:00 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Black Panther
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US debt will prevent interest rates from rising for the foreseeable future, recovery or not.
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Mike
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Dr Watson
3 Dec 2013, 09:47 AM
Peter, you've been linking to articles calling the global/US recovery for some time now. If it is true then shouldn't the Fed be taking away the punch bowl?

I think we should remain sceptical for as long as the punch bowl remains on the table.

The global recovery is NOT real until then.
The US has been recovering over the past few years with slowly improving economic figures. It was the largest recession since the 1929 depression which took the US until the early 1940s to emerge from.

Nearly any figure you care to look at in the US is growing at a modest amount. I think the Fed is overly cautious and stimulus should have been tapered by now. A slow wind back of stimulus and a return to a more normal setting is impossible to avoid now.

The US economy is much stronger then simplistic data would suggest, if it was not then the countless Congressional disasters would have derailed it yet alone the European debt issues over the past 2 years. Yet the US economy just smiled and kept growing and improving with unemployment moving down.

Our dollar is not going down due to much weakness here but rather the return to strength of the US economy and hence the US dollar. A trend which will continue.

A lower dollar will be great for our economy but the RBA will need to keep an eye on inflation as all our imports increase in value to purchase.
Edited by Mike, 3 Dec 2013, 10:08 AM.
http://mike-globaleconomy.blogspot.com.au/
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Black Panther
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Mike
3 Dec 2013, 10:07 AM
The US has been recovering over the past few years with slowly improving economic figures. It was the largest recession since the 1929 depression which took the US until the early 1940s to emerge from.

Nearly any figure you care to look at in the US is growing at a modest amount. I think the Fed is overly cautious and stimulus should have been tapered by now. A slow wind back of stimulus and a return to a more normal setting is impossible to avoid now.

The US economy is much stronger then simplistic data would suggest, if it was not then the countless Congressional disasters would have derailed it yet alone the European debt issues over the past 2 years. Yet the US economy just smiled and kept growing and improving with unemployment moving down.

Our dollar is not going down due to much weakness here but rather the return to strength of the US economy and hence the US dollar. A trend which will continue.

A lower dollar will be great for our economy but the RBA will need to keep an eye on inflation as all our imports increase in value to purchase.
Actually wasn't it WW2 that ended the Depression.
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stinkbug
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Dr Watson
3 Dec 2013, 09:47 AM
Peter, you've been linking to articles calling the global/US recovery for some time now. If it is true then shouldn't the Fed be taking away the punch bowl?

I think we should remain sceptical for as long as the punch bowl remains on the table.

The global recovery is NOT real until then.
I think it will be the other way around. The US will keep stimulus measures in place until they are damn sure things have improved significantly, and are trending solidly in the right direction, then they'll ease the stimulus off slowly.

No point going to all the effort of stimulating if they're going to yank the rug out from under the economy at the first opportunity.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Dr Watson
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stinkbug
3 Dec 2013, 10:26 AM
I think it will be the other way around. The US will keep stimulus measures in place until they are damn sure things have improved significantly, and are trending solidly in the right direction, then they'll ease the stimulus off slowly.
Until such time as they do, the 'recovery' is unconfirmed in my view.
Edited by Dr Watson, 3 Dec 2013, 10:32 AM.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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miw
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Dr Watson
3 Dec 2013, 10:31 AM
Until such time as they do, the 'recovery' is unconfirmed in my view.
As they say, nobody rings the bell at the bottom. We are all entitled to our own view and the consequences of actions we take based on that view.

BTW I am not saying you are wrong. You could turn out to be right. But by the time the Fed gets around to confirming a recovery, I'd say the bird will have flown.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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stinkbug
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Dr Watson
3 Dec 2013, 10:31 AM
Until such time as they do, the 'recovery' is unconfirmed in my view.
Fair enough, but the 'recovery' will be something only confirmed by hindsight, not foresight. Given policymakers act on printed figures, removal of stimulus will, by definition, be by hindsight.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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