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A$ Grinds Higher On Improved Risk Sentiment

AUD

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.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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