US Dollar surged against major currencies as President elect Donald Trump confirming in a trade rally increase in spending in infrastructure and the Fed set to tighten monetary policy to contain inflation fears. As a result the Australian dollar has headed south with the weekly value falling by over 4 %. The AUD was trading at 73.94 US cents on Friday and a short time ago was at 73.29 US cents. The US Treasuries continue to rally with the 10 year bond yield rising to 2.35%. The Aussie 10 year yield also went up as a result to 2.72% but the spread to US has narrowed to 37 basis points.
HOUSING A MAJOR RISK GOING FORWARD
The Australian housing market remains a concern however a number of people that I have met recently at the Finance and Treasury Association conference seemed to think that housing by itself will not trigger an economic event. One of the factors could be the potential credit squeeze as lending institutions tighten criteria which makes investors or first home buyers access the off the plan housing market. That could mean a fall away of demand which may result in slower take up of new apartments and potentially slowing the construction of new apartments. Such an event can result in rise in unemployment particularly in the construction and allied sectors. As US economy realigns under the Trump presidency commencing in January 2017, we believe that the Australian economy is likely to enter into some headwind as a result of the fall in the housing industry. The silver lining to this is off course the surge in the price of coal and iron ore. We have not seen major signs of significant and sustained increase in Chinese demand of iron ore over longer period and while the current surge is great news, we do not believe the growth trend in prices will continue.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Industrial Average Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) Iron Ore | As at 18-Nov 1.50 1.76 2.72 2.35 0.7394 0.6971 81.74 5.0945 5,359 2,181 18,867 3,192 46.86 1,207 70.20 | As at 11-Nov 1.50 1.76 2.56 2.15 0.7618 0.6986 81.11 5.1888 5,370 2,164 18,847 3,196 44.75 1,227 73.35 |
RSS Feed