Australian Dollar collapses: China lockdown and COVID outbreak, Stagflation issues/inflation spikes. Foods prices in the US are now reaching crisis levels. Will the Fed hit an emergency rate increase? At over 1%. New Cold War should be called as the nuclear war situation could escalate.

 

As discussed in this April 06th post, the Australian Dollar was not only overbought, but it was mispricing four things.  1.   China/Australia stagflation problems.  2.  China COVID problems.  2.  Russia's invasion of Ukraine.  4.  U.S inflation and the Federal Reserve.  Who are now trying desperately to contain with a soon-to-be 0.75% cash rate rise, that won't do much at all.  But, in comparison to the AUD which is sitting at a measly 0.10%, a speculative currency used in risk on markets, was drastically overpriced compared to the USD which was already underwritten with a 0.25% rate.  

The AUD currency is sensitive to Chinese economic conditions and for all the China bears out there, it should be suffice in saying, that China is in trouble.  Mainly with COVID-19 that has swing back to the nation with a vengeance, testing their zero covid policies with vaccination rates amongst the elderly too low, China may lock down Beijing.  Hence the AUD collapsing from 0.72 to 0.71 (Chart above, with its price support at 0.75 broken.  Green line is the USD which is bid, driving down the AUD), also weighing on the currency is food inflation, particularly the largest economy in the world, America.   To which the Fed will have to hit another rate increase in a most likely scenario, to be an emergency % hike.   The U.S. interest rate, in all retrospect, should be above 2%.  But, alas an institutionalization market which is heavily connected to its liquidity provider, which are Central Banks is something we haven't seen in over 20 years of Central Bank policies.   So it won't be pretty when this all breaks apart and maybe the AUD is that cannery in the coal mine. 

And as a side note:

The other very concerning issue is the Russian, Ukraine conflict, that should be named as the start of a new Cold War, so that the lines are less blurred through disinflation.   Russia is stepping up the propaganda through the social media platforms aimed at gaining sympathy with the so clalled libertarian right wing.  The more this drags on without Cold War differentials being implemented, the more confusion reigns and who knows where this will end up.   The threat of nuclear war should be raised, so that a  fear of thermonuclear  deterrence/annihilation can once again become a U.N issue and thus a global one.

Russian oil facilities under attack?  https://www.reuters.com/world/europe/large-fire-oil-depot-russias-bryansk-near-ukraine-agencies-2022-04-25/