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A$ Rebound Capped By Weaker Commodities

AUD

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

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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

Keep reading...Show less