Dax in the Evening

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A slightly less dovish Grandma of the Fed

The Fed statement was incrementally more hawkish than its March statement, removing its concerns about “global and financial developments”

This caused a brief rally in the US dollar although it ended the session largely unchanged. Nonetheless, the removal of uncertainty now that the Fed meeting has passed is likely to be taken as a positive for Asian markets today.

The other major positive for equity markets was the further decline in oil production in the Energy Information Administration’s (EIA) weekly report, which helped WTI oil gain 3% and close above US$45. US crude oil production fell to 8.94 million barrels per day, and is now down about 650,000 barrels per day from its peak.
The Reserve Bank of New Zealand (RBNZ) left rates on hold as expected today, but this has prompted quite a rally in the Kiwi dollar. The combination of unchanged US rates, a continued rally in crude oil and the prospect of further easing by the Bank of Japan at their meeting today is fuelling a bullish move in Asian futures markets. The ASX is set to open 0.9% higher, with the Nikkei to open 0.7% higher.

The Fed statement seems highly appropriate. Global concerns, specifically around a potential Chinese yuan devaluation, have ebbed considerably, but at the same time US economic data continues to be very weak. Currently, the Atlanta Fed’s GDPNow estimate for the first quarter is sitting at 0.6%, and a June rate hike does seem unwise. The WIRP bond-market implied probability still only has December as the first date with an above 50% probability for a rate hike. Although more hawkish language from the Fed in June seems likely should they want to start signalling the potential of a rate hike in 3Q, with September the most likely date if such a path is taken.

After cutting rates at their previous meeting the RBNZ left rates on hold today, although they left a strong easing bias in the statement and another rate cut in June is highly likely. The RBNZ statement also noted their concerns that Auckland house prices may be on the rise again, possibly another reason behind the temporary rates pause. But the ongoing strength in the Kiwi dollar is clearly causing trouble, which was evident in yesterday’s trade data as exports declined 14.3% from a year ago.

The Aussie dollar looks on the verge of a major capitulation as expectations for rate cuts by the RBA have increased significantly after yesterday’s weak CPI numbers. Alongside this, the Qingdao iron ore price has fallen 13.3% over the past week as China seeks to rein in retail trader speculation in its commodities futures markets. Nonetheless, the RBA is unlikely to cut rates at their meeting next week and the Aussie is likely to pull back a bit in the short-term, but sentiment does seem to have dramatically changed in the currency. And rate cuts in the second half the year look increasingly likely if GDP and employment growth begin to wilt alongside inflation.

The AUD/NZD has bounced off its key support of A$1.0940, and one should be looking for a break of this level before a reversal is confirmed.
 
You said that it is $1.13 per liter. I am assuming that that is in AUD. $1.13*3.78541 = AUD4.2775*0.7599 = USD3.25. This is much cheaper than what I pay. People think that "petrol" is so cheap in the US. That is only the case if you do not live in California.

This graph shows that Australians spend less money on "petrol" as a percentage of their annual income than Americans. Even though, it says that the average price per gallon is $2.74, I pay about $4.30 per gallon. That is USD1.13 per liter. I had heard that the price per liter was more on par with the UK than with us. You are lucky. It is cheaper than mine.

In fact, Norway pays even less. Even though "petrol" prices are absurdly high there, they have an extremely purchasing power parity to balance it. They spend 0.68% of their annual income on "petrol". That is a third of the amount we spend here.
Screen_Shot_2016_04_27_at_5_33_03_PM.png
 
hhiusa said:
You said that it is $1.13 per liter. I am assuming that that is in AUD. $1.13*3.78541 = AUD4.2775*0.7599 = USD3.25. This is much cheaper than what I pay. People think that "petrol" is so cheap in the US. That is only the case if you do not live in California.

This graph shows that Australians spend less money on "petrol" as a percentage of their annual income than Americans. Even though, it says that the average price per gallon is $2.74, I pay about $4.30 per gallon. That is USD1.13 per liter. I had heard that the price per liter was more on par with the UK than with us. You are lucky. It is cheaper than mine.

In fact, Norway pays even less. Even though "petrol" prices are absurdly high there, they have an extremely purchasing power parity to balance it. They spend 0.68% of their annual income on "petrol". That is a third of the amount we spend here.
Screen_Shot_2016_04_27_at_5_33_03_PM.png
Click to expand...

Yep, US is a wonderful place to live in, but an expensive one like no other. My friends in different countries are often surprised to find out the price of living here.:eek:
 
US GDP is crap

After the Bank of Japan surprised markets with no further stimulus, the yen had a 3% rally and its strongest one-day performance since China devalued the yuan in August last year.

The US dollar initially shrugged off these developments, but the release of weaker than expected 1Q GDP saw the Dollar index lose over 1% as hopes for a June rate hike were definitively dashed. Business investment, net exports and inventories all dragged on GDP, while consumption growth was weaker than many had hoped.

The current set up for the Asian session is looking quite negative. Carl Icahn sold his US$4 billion stake in Apple, which sent the stock down 2.9% and impacted US markets due to its large market capitalisation weighting. The ASX is set to open 0.1% lower as equity markets continue to react poorly to weak US growth and lack of further stimulus from the Bank of Japan. Although the materials and energy space is set to see a strong day. The commodities space was a clear winner from the decline in the US dollar as most major contracts are priced in USD and saw their value comparatively increase. WTI oil gained 1.2% overnight as it continued in its incredibly robust uptrend.

After prices were impacted by China trying to rein in some of the rampant speculation in its commodity futures markets, Dalian iron futures bounced back yesterday and gained 6%. The Qingdao iron ore price similarly gained 3%. The Chinese stimulus that spurred the gains in the commodities space is not over yet so it is unlikely that in the short term we will see the iron ore price crash back down into the US$40 handle. Although a rally in the USD and slowing Chinese credit growth is likely to change such a situation over the coming months.

It is also quite a big day for data releases. Australian 1Q PPI and private sector credit numbers will be released. After the major CPI miss, analysts will be carefully looking at the PPI numbers to see similar weakness and how that may play into RBA’s interest rate decisions.

While US GDP growth was weak in 1Q, this is historically quite common in the US and growth often rebounds in 2Q. And since then we have seen significant weakness in the USD and there is a good chance we start to see the data pick up from here.

The US dollar also looks unlikely to break significantly lower. The DXY dollar index is currently resting on a very consistent resistance level around 93.8 and it has already bounced off this level three times in April and May. Indicating that it would not take all that much good economic news out of the US to start seeing the US dollar start gaining strongly.
 
zaysev36 said:
Yep, US is a wonderful place to live in, but an expensive one like no other. My friends in different countries are often surprised to find out the price of living here.:eek:
Click to expand...

I know there is areas in California which are expensive.
But in a general rule I have found the US a lot cheaper than Australia.

Food & drink
Property
Clothes
Car's

Australia used to be cheaper in the 90's
 
Oscar Reed said:
I know there is areas in California which are expensive.
But in a general rule I have found the US a lot cheaper than Australia.

Food & drink
Property
Clothes
Car's

Australia used to be cheaper in the 90's
Click to expand...

Things may be more expensive in Australia as a general rule. However, you also get "more bang for your buck" there. Your purchasing power parity is higher there due to many of the free services. Basically, $1000 actually goes further in Australia than it does here, even though things are more expensive there.

I was pointing this out earlier with Norway. Even though the cost of "petrol" is insanely high and the cost of food is even higher, their PPP is extremely high. Their HDI is among the highest. Norway appears to be a prima facie case of one of the most expensive places in the world. However, since many services are free or are dirt cheap, they live like kings on a much lower salary.

The average general practitioner in Australia makes around USD91,000 per year. At first glance, it would appear that their doctors are being paid considerably less than in the US where doctors average USD161,000. If you adjust the figures to compensate for purchasing power, you will realize that Australian doctors make more than their American counterparts.

Adjusted for PPP
Australia - $247,000

In short, what sometimes looks more expensive, actually is not.

The Netherlands is the best place to be a doctor. They make USD257,000 after adjusting for PPP.
 
hhiusa said:
Things may be more expensive in Australia as a general rule. However, you also get "more bang for your buck" there. Your purchasing power parity is higher there due to many of the free services. Basically, $1000 actually goes further in Australia than it does here, even though things are more expensive there.
Click to expand...

Could you give some examples of those free services? I really wonder what are those, and why do they happen to be free?
 
**** this been up since 4am for crap - 18 hours

Goodnight
 

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