A$ Grinds Higher On Improved Risk Sentiment

AUD/USD is back close to session highs of around 0.6960, largely on improved risk appetite, close to +0.30% for the day.

• Asian equity sentiment has received a boost as Shanghai declared zero community transmission. Three consecutive days of this and curbs could be relaxed. The Chinext index is up close to 4.3% at the time of writing.
• Equity futures in the US and EU are pointing higher as well.
• Iron ore is higher, back above $130/tonne, likely on the China news. Oil has also recovered ground.
• These moves are offsetting lower yield differentials with the US, with the 2yr spread back to flat. As we noted yesterday short-term correlations remain stronger with equity and commodity performance.
• Earlier the Westpac-MI Consumer Sentiment Index fell by 5.6% to 90.4. This takes us back to Q3 2020 levels. Still, the move is hardly a surprise given last week's rate hike and weaker equity market sentiment.
• The A$ has outperformed the safe havens in G10 FX, but only by 0.20-0.25%.
• AUD/USD has struggled to get through 0.6980/90 in recent sessions, while we have bounced off 0.6910/15 a couple of times. Current ranges may persist until the US CPI prints later today.