The June FOMC showed a sharp lift in the nbr of members who felt inflation risks were tipping higher. With headline & core PCE still well above '21 projections, a majority of members likely still see inflation risks skewed higher, even as they underscore the transitory story.

Looking back at the six instances when the Fed's dot plot shifted as sharply as the June FOMC: the US$ and US rates trended higher for a good month in the wake of these meetings. #macro #DXY #fx

Iron ore/ steel markets watching Chinese imports of scrap given target of increased self-sufficiency to be part met by raising scrap in steel to 30% by 2025. Scrap steel utilisation circa 20% China vs 55% in EU28, 42% Russia & 69% N America. May scrap imports near 3yr high 114mt.

Real money accounts on CME extended A$ net shorts to -11.9k contracts from -6.2k over wk to 15 Jun (spot close 0.7687). Well-timed ahead of FOMC & their most bearish stance since May 2020, but not large in historical context. Leveraged funds trimmed net longs to 17.2k from 20.6k

2013/14 Fed analogue suggests last week's Fed shift may be enough to put a solid base under the US$. But US$ upside will evolve slowly: '13/14 saw several multi-month setbacks before sustained upside kicked in mid-14, when tapering was very well advanced.

Extrapolating the 278-785k reopening jobs data shows big differences in timelines for "substantial progress". If +785k (Mar) is repeated Covid job losses are recouped by Mar ‘22. On April's 278k, Covid jobs lost are not recouped until Aug ‘23. May lands in the middle #fx #macro

And importantly, the degree of stretch between fair value and A$ spot is reaching historical extremes. Indeed, the largest deviation on weekly data back to 2008 is 10.8% - last week we hit 8.8%. #AUDUSD #ausbiz

Our A$ fair value midpoint has averaged 0.8330 over the last 4 wks. However, courtesy of close to record highs for iron ore and 2yr highs for met coal, fair value for the A$ rose sharply last week to a midpoint of 0.8450, meaning the A$ is seen as cheap below 0.8180.

Leveraged funds on CME extended A$ net longs to 23.8k contracts from 20.2k in week to 1 June (spot close 0.7754), their most bullish stance since 13 April. But real money accounts flipped to net short -4.0k from +1.5k. Week incl RBA decision but not Australia's strong Q1 GDP

Us data surprise indices are collectively at their lowest levels since the '20Q1 Covid cliff, nearing levels where expectations are reigned in. Payrolls whisper talk this week likely to be more low key than the unchecked bullishness going into last month's nbr #macro #dxy

Thankyou iron ore ...

Leveraged funds on CME trimmed A$ net longs slightly to 20.2k contracts from 22.0k over the week to 25 May (spot close 0.7751). Real money accounts squared up a little more, to just 1.5k from 3.5k the week prior. Wary positioning consistent with AUD/USD range trading

Given the current RBA YCC stance, last week's Covid lockdown news and slow Australian vaccination rates, China's recent verbal commodity intervention + ongoing trade tensions, it feels like the current deviation will remain in place for some time to come #AUDUSD #ironore #Coal

The current deviation between our fair value read and the A$ is currently at 7.5% which is still below 10yr max and it's worthy of note that A$ has remained deviated by more and for longer than current, for instance end 2013 where it was deviated circa 8% for 6 weeks.

A$ fair value has actually been fairly stable over the last 4wks, averaging 0.8270, meaning A$ is seen as cheap below 0.7960. While iron ore has been on a roller-coaster ride, thermal coal is up 22% mtd and met coal up 38%, offsetting more than offsetting weakness in iron ore.

Try as hard as they can, Australian miners just cannot see that #commodity #supercycle that everybody seems to be talking about. 2022 Capex mining building & structures +4%yy (est 2 on est 2), -0.15% vs est 1 for 2022 & down 74% vs 2013 Capex peak. Happy to sit this one out?

Leveraged funds on CME raised A$ net longs to 22.0k contracts from 17.1k over the week to 18 May (spot close 0.7792). Real money accounts trimmed net longs to 3.5k from 7.4k, another week of very small net positions consistent with rangebound spot trade.

1/5 Happy to debate, but I am not sure that there are too many signs of "excessive speculation" in Chinese #IronOre and #steel futures markets. Aggregate iron ore and steel futures volumes are much closer to multi-year lows, and nowhere near historic highs.

#DXY tracking 2yr spreads more than 10yr, loosely suggests: 1) Fed's patient signaling/anchoring (2yr) carries more sway than inflation risk (10yr); & 2) Europe's rebound a factor too, a good part the 2yr spread move reflecting higher bund yields #macro #DXY

#3 ...but the price signals are there for mining investment to lift: Could long term investment inflows - which will likely follow in coming quarters - underpin the next AUD leg higher? #macro #Aussie