The post Asia close low in AUD/USD came early in the London session at just above 0.6880. From here we climbed back close to 0.6950, before settling back at 0.6925, which is where we currently sit.
- The A$ got some relief from the sharp pullback in US yields, with the US 2yr back to a 3.05% handle (-14bps). US recession fears seemingly the driver of the yield move. This move weighed more broadly on USD sentiment.
- This should help stabilize AU-US spreads at the short-end, we got to a -18.5bps low yesterday.
- Still, commodities presented a headwind, as global growth fears weighed. Base metals weakened further, off a further 2.7%, see the chart below where performance is plotted against AUD/USD. Iron ore was a little firmer though pushing back above $111 from sub $108. Oil also finished up from overnight lows.
- Equities were weaker, although declines in US stocks were fairly modest. The VIX dipped sub 29%. AUD/JPY dips sub 93.75 were supported and we are back around 94.25/30 currently.
- Today's data calendar has preliminary PMI readings for June.
Fig 1: AUD/USD & Base Metal Prices
Source: MNI - Market News/Bloomberg