Australia Focus : You’re Unbelievable

http://www.youtube.com/watch?gl=SG&v=waacof2saZw&hl=en-GB

Chorus :

The things, you say
Your purple prose just gives you away
The things, you say
You’re unbelievable

Unbelievable stories from Australia :
Boozy Feral Pig Steals Beer From Campers, Gets Drunk and Starts Fight With A Cow

and just yesterday, Man Dies After Hitting Emu In NSW Crash (note that emu died too)

It’s as if Australia has turned from global investment darling to a basket case within a span of a few weeks as far as the currency goes and all those investments by China, Singapore, Malaysia and gang in the last 5 years are looking precarious, sitting on foreign exchange losses.

Economy wise, Australia is, oddly, holding very strong just looking at the Citi Economic Surprise Index that is hovering near its 5 year high (and one of the highest in the world), meaning that economic data is outpacing forecasts.

AUD VS CESIAUD

Thus this prolonged weakness in the currency that has also driven the ASX 200 Index to negative for the year, is confounding us all as we noted 2 weeks ago. https://tradehaven.net/market/australia-weekly-cowboys-down-under/

aud-update

It is the commodities, China and the whole lot of fear that is griping markets now and into the RBA tomorrow morning at 1130 am (SG time) where they are expected to stand pat on their 2.5% cash rate target and remain at status quo for an extended period. http://www.bloomberg.com/news/2014-10-05/rba-makes-hawks-cry-with-turn-from-rate-tools-australia-credit.html

The housing market has now suddenly become a problem which is a Big Worry for investors who had piled in after months of denial by the authorities that everything was under control. All of a sudden, the market is expecting a roll out of “unconventional” tools to rein in prices which may include mortgage curbs. http://www.bloomberg.com/news/2014-10-01/rba-says-talks-on-home-lending-curbs-may-go-beyond-investors.html

That could put additional pressure on the currency as retail investors panic which I expect will be tempered by government asset sales which will attract plentiful foreign capital. http://online.wsj.com/articles/australias-northern-territory-mulls-sale-of-insurance-assets-port-lease-1412416557

In addition, we Australia confronting the ISIS in battle (without any Australian beheadings yet) and taking on a bigger global security role in the NATO and UN which will undoubtedly be expensive. http://www.bloomberg.com/news/2014-10-02/australia-s-spooks-diplomats-stretched-thin-by-security-tasks.html

And they will be requiring additional taxes for that which has just been mooted by the Federal government. http://short.ninem.sn/OddyRze

All good news for AUD bonds in the medium term although I expect that there could be comments with regard to currency volatility out of the Bank of Japan and we have been getting some serious rumblings on the excessive JPY weakness these days. Any JPY strength could impact the AUD for its role in the AUDJPY Uridashi trade and we could see a rebound as sharp as the one day rebound we had last week (Target 0.89).

With the ECB out of the way, I think we can get ready for the EURAUD trade again as the path for carry trade returns and a slow drift back down to 1.40 is likely.

EURAUD

There will be no rest this week as we move from RBA to BOJ to BOE and Fed Minutes.

Good luck !

Indicative bond prices requested by reader Peter.

aud bonds request

Indicative bond prices for AUD bonds of 2014 as of 3 Oct.

aud bonds