Analysts at Rabobank explained that it’s not just EM looking wobbly.
Key Quotes:
“Australia, watching the US-China trade war with the same look on its face as a toddler watching its parents fight, is facing higher funding costs for its mortgage-bloated banks as wholesale money markets look at a growing revelation of far too much lending relative to ability to pay, think back to how that played out in the US and Europe, and price funding costs appropriately. Just as plenty of households have to roll from interest-only to repayment mortgages, several Aussie banks have been forced to raise their mortgage rates by 12-15bp over recent days.”
“Meanwhile, housing turnover has already fallen to its lowest level since 1990. Add in the awful building approvals data from yesterday (-5.2% m-o-m and -5.6% y-o-y) and while the RBA still pretends that it will be raising rates eventually as all is hunky dory, I simply don’t believe them. Future rate cuts and QE are more likely at this stage: is it any surprise AUD is at 0.7264 at time of writing? One wonders when we re-test the intra-day August low of 0.7210.”
“One currency likely to hold up better today is JPY, mostly on general risk-offery but partly as Tokyo CPI rose 1.2% y-o-y this morning, a tick higher than expected, and 0.9% core vs. 0.8% expected (though industrial production sank -0.1% in the month rather than rising 0.2% as the consensus had projected).”
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