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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUD
AUD/USD correlations with global equities/risk measures remain firm, as well as with global commodities, ex iron ore. Correlations are negative with yield spreads on a short term basis.
- The table below presents correlations (levels terms) for AUD/USD with key macro drivers over the past week and month.
- The weaker correlations with government bond yield spreads are not surprising, given yield momentum has generally moved against the AUD over the past week, as the A$ has bounced. The AU-US 2yr spread is back close to -110bps, down from recent highs near -95bps.
- This comes despite yesterday's decent Q3 CPI beat, and speculation around a reduced pace of Fed tightening. Next week delivers the RBA meeting, which historically has seen higher short term correlations between spreads and the A$.
- Elsewhere, correlations remain firm with global commodities, including base metals. The correlation is strongly negative though with iron ore. Iron ore continues to drift down, despite the firmer backdrop for other metals, see the chart below. It is finding some support in the past 24 hours, last at $87.40/tonne for the active Singapore contract.
- As correlation with global equities also remains firm, although sits slightly higher with the VIX (inversely) for the past week.
Table 1: AUD/USD Correlations
| 1wk | 1mth | |
| 2yr yield differential | -0.47 | 0.52 |
| 5yr yield differential | -0.42 | 0.48 |
| 10yr yield differential | -0.44 | 0.25 |
| Global commodity prices | 0.86 | 0.22 |
| Base metals | 0.81 | 0.27 |
| Iron ore | -0.93 | -0.25 |
| Global equities | 0.73 | 0.44 |
| US VIX index | -0.93 | -0.58 |
Source: MNI - Market News/Bloomberg
Fig 1: Iron Ore & Copper Trends Somewhat Divergent At The Moment
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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