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A new year

Published January 2, 2019

by Nicholas Cork


Happy 2019 to you all.  Markets took a well deserved breather on NYE, roughly maintaining the previous days ranges but US yields did continue to fall after a sharp drop in the Federal Reserve’s Dallas manufacturing survey – worst since 2013. US equities eked out small gains to round off December, but the fact remains that they have had their largest monthly fall and worst annual performance since 2009. Comparatively the All Ord’s do not provide great reading either after peaking on Aug 30 at approx 6,500 points before erasing 15% of its value and 2 years of gains to be back near Dec 2016 levels to start 2019.

AUDUSD continues to maintain 0.7025/0.7075 and has done so since falling below 0.7080 on the 20th December. In some ways it feels as though the US rate outlook has adjusted so quickly that the AUDUSD has been somewhat left in the background as other larger parts of investor portfolios were adjusted into year-end, and it has been AUDcross rates experiencing most of the volatility. From here I would expect attention to become refocused in the next few days towards towards the AUDUSD as the world decides for risk on or off going forward and investors place their 2019 bets.  Worth bearing in mind for comparison sake that since 2000, the AUDUSD has never finished a calendar year so close to the bottom of that years range as 2018. In both 2013 and 2014 it closed the year just 5% and 6% from the lows, the following January it fell 160 points and 400 points respectively.

The AFR released their survey of Australian economists views for 2019 in today’s edition, not too much to get excited about as the mean and median AUDUSD forecasts for June 2019 and Dec 2019 are : –

Mean    0.7110 for June and 0.7140 for Dec 2019

Median 0.7100 for June and 0.7000 for Dec 2019

The survey also showed that the forecast for Australian Interest Rates are no longer all for rate hikes as the next move. The consensus is now for no Interest Rate movement from the current 1.5% until 2020, and then a hike in 2020, however please note the individual expectations for end of 2019 now fall between 0.75% and 2.00% so we are starting to see some very divergent views.

DOW vs ALL ORDS last 24 months ….