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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
A$ cross-asset correlations are elevated over shorter tenors, but still mixed over longer tenors. The biggest change since our last update is the rise in correlations between AUD/USD and yield differentials.
- The table below presents the levels correlation between AUD/USD and various cross-asset macro drivers. They are presented for the past trading week and month.
Table 1: AUD/USD Correlations
Source: MNI - Market News/Bloomberg
- Interestingly, the correlations with yield spreads have shot higher, particularly in the past trading week. This also occurred at the start of May ahead of the last RBA meeting.
- Next Tuesday the RBA will hike rates again, with the main uncertainty being by how much. According to futures markets, more than 25bps is priced for June, but we aren't at 40bps (around 35bps currently, using an effective rate of 0.31%).
- The general trend for yield spreads has been to move in favor of the currency, with the 2yr spread back in positive territory against the USD, see the chart below.
- The correlation with iron ore has also picked up. Iron ore prices have been trending higher on the back of China stimulus hopes, with an increased focus on infrastructure investment this past week.
Fig 1: AU-US Yield Spreads Trending In AUD's Favor
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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