Inflation

[noirua]

https://www.news.com.au/finance/economy/australian-economy/ruinous-oil-and-gas-prices-could-lead-australia-into-recession/news-story/2bdb8b4b9b6152332baef62d44fc8751

As @Smurf1976 has been explaining for a while, but there is a way out.
One part i do not understand is the statement that if recession hits us,the AUD would go to the moon?

Aussie$ v UK£ Live chart: https://uk.advfn.com/p.php?pid=staticchart&s=FX^GBPAUD&t=37&p=5&dm=0&vol=0&width=300&height=208&min_pre=0&min_after=0

It does look as if the Aussie is heading to AUD1.5 to GBP1.

 

[qldfrog]

View attachment 142452

Aussie$ v UK£ Live chart: https://uk.advfn.com/p.php?pid=staticchart&s=FX^GBPAUD&t=37&p=5&dm=0&vol=0&width=300&height=208&min_pre=0&min_after=0

It does look as if the Aussie is heading to AUD1.5 to GBP1.

yes, my feeling too: I would expect the AUD not to go to the moon but go down down down

 

[mullokintyre]

yes, my feeling too: I would expect the AUD not to go to the moon but go down down down

You only have to look at what has happened in every other recession where the AUD, being a proxy for commodities, has always gone down steeply.
Now if the AUD were a proxy for war armaments, now that would be different.
Mick

 

[CityIndex]

Reports are suggesting that certain OPEC+ members are prepared to increase production should output from Russia fall significantly.

This could help ease some of the renewed inflation concerns by potentially sending oil on a deeper pullback, however with strong economic data from the US overnight, it remains to be seen how much of a difference it will actually make.

 

[over9k]

Reports are suggesting that certain OPEC+ members are prepared to increase production should output from Russia fall significantly.

Yep I've seen a couple of headlines showing this, particularly from the saudi's.

This war might have stuck a thorn in the side of OPEC too and anyone that knows anything about cartel game theory knows they're inherently unstable so we might see russia's influence within OPEC go as well.

It can only be a good thing (for them) to have the rest of the world MORE reliant on their oil so a bit of betrayal/backstabbing wouldn't surprise me here at ALL.

 

[over9k]

Yep lots of talk of the saudi's upping their output and opec meeting today, looking like another topup opportunity.

 

[waterbottle]

OPEC's real test...

It tends to be made of relatively poor nations who don't have much except for oil. It'd be real charitable of these poor nations to sit on their hands and not pump additional oil to make up the shortfall whilst POO is at all time highs...

We shall see

 

[frugal.rock]

It is not brain science !

Nor is it rocket surgery...?

 

[noirua]

yes, my feeling too: I would expect the AUD not to go to the moon but go down down down

The chart shows the opposite with the Aussie going up and up. It's the GBP going down. The European countries are stuffed as far as oil, gas, pasta, beef and wheat are concerned. The USA and Australia come out of this rather well except for food prices. Diesel in the UK costs A$3.20 a litre. UK inflation is 9%, USA 8.5%, Australia 6%, Russia 17.5%, Turkey 68%, New Zealand 6.9%, Germany 7.9%, China 8%, France 5.8%, Spain 8.7%, Italy 6.9%, Poland 13.9%, Switzerland 2.9%, Canada 6.9%, Iran 39.3%, Israel 4%, Japan 2.5%.

 

[qldfrog]

The chart shows the opposite with the Aussie going up and up. It's the GBP going down. The European countries are stuffed as far as oil, gas, pasta, beef and wheat are concerned. The USA and Australia come out of this rather well except for food prices. Diesel in the UK costs A$3.20 a litre. UK inflation is 9%, USA 8.5%, Australia 6%, Russia 17.5%, Turkey 68%, New Zealand 6.9%, Germany 7.9%, China 8%, France 5.8%, Spain 8.7%, Italy 6.9%, Poland 13.9%, Switzerland 2.9%, Canada 6.9%, Iran 39.3%, Israel 4%, Japan 2.5%.
View attachment 142473

Indeed, Europe is screwed via self mutilation
But i still believe that recession will bring the aud down down down
Look at the behaviour vs pound during GFC

From 1aud getting 0.6 pound down to gfc nearly 0.5.
But i agree we are better off than most except that we are actually in a trade war with China, kept quiet due to elections?

 

[divs4ever]

yes, my feeling too: I would expect the AUD not to go to the moon but go down down down

Australia still has exports as long as the current regime doesn't irritate our trading partners ( not just China ) we should do comparatively OK

BUT we will feel the pain from not forming a wider range of trading relationships in the past , i would have thought the GFC was the warning sign to do that

 

[divs4ever]

OPEC's real test...

It tends to be made of relatively poor nations who don't have much except for oil. It'd be real charitable of these poor nations to sit on their hands and not pump additional oil to make up the shortfall whilst POO is at all time highs...

We shall see

it's easy to blame those 'oil-rich' nations but there is also an agenda to reduce funding for oil exploration and development ( and a separate agenda to destabilize many of those same nations )

those 'poor-nations ' might have long memories and remember how opportunistic the West has been ,

it would be a shame if OPEC became stronger as a result of hostility towards them .. but not unreasonable

 

[waterbottle]

it's easy to blame those 'oil-rich' nations but there is also an agenda to reduce funding for oil exploration and development ( and a separate agenda to destabilize many of those same nations )

those 'poor-nations ' might have long memories and remember how opportunistic the West has been ,

it would be a shame if OPEC became stronger as a result of hostility towards them .. but not unreasonable

Oh, I'm not blaming them. But understanding their predicament. Most of these countries are worse off than Russia, so it would not make sense for them to give up the opportunity to make money or improve themselves by selling a commodity near all time highs when it's unlikely to remain there for very long.

 

[divs4ever]

Russia sucked up the pain back in the 1990's ( and later )BUT learned the lessons and veered towards self-sufficiency , i am betting Russia is giving a discount to reliable customers and at the same time locking in multi-year contracts .

and agreed that YOU aren't blaming them , but they are being blamed by others who have weaponized guilt for example Sleepy Joe hoping Venezuela would rush to rescue the US , and i see Saudi Arabia is also looking at business relationships rather than political relationships in recent times

what might be worth watching is if South-East Asia becomes a closer trading alliance among themselves and IF they improve ties with India or China ( or both )

however oil-rich nations MIGHT learn some lessons from Norway and Brunei and while neither is fully self-sufficient , they can deploy the funds efficiently

 

[mullokintyre]

The chart shows the opposite with the Aussie going up and up. It's the GBP going down. The European countries are stuffed as far as oil, gas, pasta, beef and wheat are concerned. The USA and Australia come out of this rather well except for food prices. Diesel in the UK costs A$3.20 a litre. UK inflation is 9%, USA 8.5%, Australia 6%, Russia 17.5%, Turkey 68%, New Zealand 6.9%, Germany 7.9%, China 8%, France 5.8%, Spain 8.7%, Italy 6.9%, Poland 13.9%, Switzerland 2.9%, Canada 6.9%, Iran 39.3%, Israel 4%, Japan 2.5%.
View attachment 142473

The AUD is the 5th most traded currency in the world according to FXSSI.
The amount of trading is far greater than the weight of the OZ GDP, because its a seen as a proxy to commodities.
Whether this is accurate is immaterial, it all depends on the sentiment of traders to the AUD.
Fundamentals don't seem to matter much.
As I said, you just need to look at past history.
Below is a snapshot of unemployment rate against the periods of defined recession for the US.
Although we have dodged a technical recession in recent times when the US has had one, historically we follow them

Unfortunately, I can not get data for the same period for the AUD GBP,, but a quick check for the recessions in1980, 1983 and 1990 show that the GDP/AUD pair shoed it to be over 2 AUD to the GDP throughout that period.
Mick

 

[waterbottle]

The Fed believes that a $2.5T run-off will have the same effect as a 0.5% interest rate hike!!!! Seems pretty useless....

Substitutability between Balance Sheet Reductions and Policy Rate Hikes: Some Illustrations and a Discussion

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

 

[3 hound]

The Fed believes that a $2.5T run-off will have the same effect as a 0.5% interest rate hike!!!! Seems pretty useless....

Substitutability between Balance Sheet Reductions and Policy Rate Hikes: Some Illustrations and a Discussion

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

What do they mean by "policy rate hike"??

Is that a weird name for interest rates?

 

[waterbottle]

What do they mean by "policy rate hike"??

Is that a weird name for interest rates?

yep

 

[over9k]

Last runoff in I think 2018 resulted in a pretty decent drop just for those wondering.

 

[waterbottle]

Last runoff in I think 2018 resulted in a pretty decent drop just for those wondering.

That was arguably due to interest rate hikes