Ian Reynolds
A Sea Change For Markets
It started with a second surprise rate hike in Australia, followed by one in Canada. The policy mistake of pausing because the population is hurting, will cost these countries dearly. Only the FED has talked the talk and walked the walk and that's why short-term rates are similar to prices-paid which gives them a good chance to contain inflation if the banking system (what's left of it) passes on rate rises.
It's economics 101. If you don't have deposit rates above inflation then the public is going to spend their money now, rather than later.
RBA Statement [RBA]
BOC Raises Rates 25bps [BoC]
FED and ECB meetings this week.
The soft landing / hard landing narrative seems to be changing to stagflation.
The worst of all worlds.
Gold Update
Coiling for a big move with the all time triple top above.
Silver Update
Similar to Gold but less structure. Look for a move to $30
Bitcoin Update
The FUD continues in the US with the SEC suing anything that moves in the crypto space. Despite this, BTC has been resilient although it's lost the 100 day MA now so look to the 200 MA @ $23,500 to start accumulating for the explosion higher.
There is growing speculation that the creator of Bitcoin may not have been Japanese and living in the US. He or she could in fact be a US or UK agency specialising in cryptography. The language used in the Bitcoin White Paper and it's reference to the UK Chancellor suggest to this Englishman that Satoshi lived in UK.
In Case You Missed It
Bonds Everywhere Are Suffering as Rate-Hike Fears Swamp Traders [Bloomberg]
China: Foreign Investors Bailed on Bonds to the Tune of US$7.2 billion in May [South China Morning Post]
China’s state banks cut deposit rates to bolster economy, but officials at Lujiazui Forum remain tight-lipped [South China Morning Post]
Australia
Lowe's speech at Morgan Stanley confirmed the hawkish rhetoric that inflation is too high and we're going to keep hiking to contain it. Chart above shows core inflation in Australia is the highest in G8 and rates at 4.1 % now are still way too low.
I'm hearing stories of property owners rushing to list - don't believe the rose-tinted press.
I'm also talking to institutional investors now actively staying away from Australia as there's now a perception that the RBA has lost control of inflation.
National accounts were grim reading with a slowing of GDP growth and an ongoing productivity problem.
Cash rate could hit 4.85pc after largest ever drop in productivity [AFR]
Bond markets signal recession ahead [AFR]
Australia’s investment environment has gone seriously wrong [AFR]
More developers at risk of loan ‘breaches’ as rates surge [AFR]
RBA’s $25K dinner after jacking up rates [news.com.au]
ABS Economic activity up 0.2 per cent in March Quarter [ABS]
AUD / USD Trade Update
Short 0.7000
Short 0.7100
Short 0.6775
Stop 0.6825
Positive carry
Great week for day traders hopefully as the price hit both the low and the high Bollinger Bands.
This is now a 300bp rally reminiscent of where we were able to get the first shorts on at @ 0.70c and 0.71c.
We remain bearish although a more resolute RBA and a US in chaos could change our mind. Stop remains at 0.6825 although this is of course, taking profit.
This Week's Economic Indicators [London time]
