A$ Outperforms Safe Havens, RBA In Focus Today

AUD/USD couldn't sustain gains above 0.7200 post the Asia close, as US yields surged. We finished the NY session sub this level and open this morning around 0.7195. The A$ did outperform safe havens JPY and CHF though.

• To recap, US yields spiked overnight, the 5 and 10yr yields now above 3.00%, while the 2yr rose over 7bps to 2.73%. This has unwound much of the recent improvement in AU-US yield differentials. The 2yr spread is back into negative territory notwithstanding some likely catch up from AU yields today.
• The signals from equities were positive, US and EU equities posted gains, while the VIX index was relatively steady. AUD/JPY pushed higher closing in on 95.00, we open this morning at 94.90.
• Aggregate commodity indices were higher, with oil largely tracking sideways, while iron ore grinded higher to $144/tonne.
• Today all the focus is on the RBA decision. Presumably a 40bps hike will induce some A$ strength as futures pricing has edged lower at the start of this week. For June the futures settled below 0.63% yesterday, down from last week's highs of 0.66%.
• The Bloomberg consensus is for a 25bps move, which would take the cash rate to 0.60%. For our full preview please see this link.