When good is bad and bad is bad

When good is bad and bad is bad.

The BAD: Data today in Australia revealed a much worse than expected outcome for the Jobs market last month. Australia cut 22.6k jobs compared to consensus expectations of a 10k increase. The impact was swift. The AUD was hit losing a significant amount of ground settling around 0.88 versus USD. Clearly there has been a worsening in job market conditions over recent months and while I am still constructive on AUD the trend in jobs is sending a worrying signal.

The GOOD: Japan machinery orders rose strongly up 9.3% in November compared to the previous month. This was cited as evidence that Abenomics is working although I’ll only believe this when we see evidence of structural reforms. Nonetheless, it was sufficient to be bad for the JPY with USD/JPY pushing eventually back towards 105. I remain negative on the yen and ultimately see higher US bond yields pushing USD/JPY even higher.

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3 Responses to “When good is bad and bad is bad”

  1. mykleman Says:

    Hello Mitul,
    Not sure I understand your outlook. You mentioned in past that market is wise to RBA talking down the currency, surely they can stil threaten rate cuts, and then implement an actual cut when that play starts getting called. I am just wondering what are the reasons for your constructive outlook. I know you busy, traveling etc. Maybe just point me to the post that highlights your outlook for aussie. They want it weaker, but you are “bullish”, am I correct?
    Travel safe.
    Graham.

    • Mitul Kotecha Says:

      Hi Graham, its a fair question and one that I have had repeatedly during the last couple of weeks from various clients. I believe that inflation pressures will pick up over coming months (inflation data is released on Wednesday) which will make it increasingly tough for the RBA to cut policy rates despite their rhetoric. Markets have become overly dovish on RBA policy and although I don’t think they will hike until later this yeart at the earliest prospects of lower rates remain limited unless the AUD surges. While I think AUD will gradually strengthen I am not looking for a renewed surge in the currency. Hope that helps.

      • mykleman Says:

        Thank you. Very understandable put that way; and duly noted into my own outlook. many thanks for quality forex & market related commentary. It is very tough to find consistent and sound commentary since the retail fx trading boom, when every second guy that can blog and insert an MA considers himself to me an authority. many many thanks for this site!


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