A$ Correlations Firmer With Yield Differentials, Less So Global Equities

AUD/USD correlations are sitting more elevated across yield differentials and some commodity prices, particularly relative to global equity sentiment. The table below presents the rolling 1 week and 1 month correlations for AUD/USD with key macro drivers (presented in levels terms).

• Short term correlations are running positive for AUD/USD and AU-US government bond yield spreads. We sit slightly higher at the back end (10yr) but for the past month, the correlations are fairly similar.
• Spreads have mostly moved against the A$, although the trend has been volatile. The 2yr spread is back to -119bps, we were at -84bps in early Jan. The post US payrolls low in the spread came around -140bps. The 10yr spread is back close to flat.
• Versus commodities, the A$ correlation is high for aggregate commodities, but less so base metals and iron ore in the past week. For the past month though correlations remain strongly positive.
• The correlation with global equities is also below normal averages for the past week and month.

Table 1: AUD/USD Correlations

Source: MNI - Market News/Bloomberg