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AUD Recovers Ground, RBA Eyed Tomorrow

AUD

AUD/USD has edged higher in afternoon trade, trying to break above 0.6830, a high from earlier today and late in NY on Friday. The A$ has clawed back some territory on crosses, although remains behind the likes of NOK and NZD for the session.

  • Local yields have recovered from earlier lows. The 2yr to 2.44% from 2.37%, although we are still 5bps below closing levels from last week.
  • Domestic data was better than expected, but attention now shifts to tomorrow's RBA meeting. A 50bps hike is widely expected by the market, see our full preview here for more details. Recall around the last 2 RBA meetings the AUD correlation with yields has become more elevated.
  • AU-NZ spreads have moved higher in AUD's favor. The 2yr swap spread is back to -47bps, close to mid-June highs. This has helped the AUD/NZD cross rebound from 1.0960/65 to back above 1.0980. There could still be further to run on this basis.
  • AUD/JPY has also rebounded back to 92.40. Note the 50-day MA comes in at 93.44.
  • Commodities remain a headwind, with iron ore holding near the session lows at close to $109/tonne. Oil and gold are higher from early lows though.
  • Still, the Australian Department of Industry, Science and Resources expects the current financial year (July 1 2022 to June 30 2023) to be another record for country's resource and energy export earnings.
  • Export earnings are expected to rise to $A419bn versus $A405bn in the financial year just completed, before falling to $A338bn in 2023/24 (see this link for more details).
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AUD/USD has edged higher in afternoon trade, trying to break above 0.6830, a high from earlier today and late in NY on Friday. The A$ has clawed back some territory on crosses, although remains behind the likes of NOK and NZD for the session.

  • Local yields have recovered from earlier lows. The 2yr to 2.44% from 2.37%, although we are still 5bps below closing levels from last week.
  • Domestic data was better than expected, but attention now shifts to tomorrow's RBA meeting. A 50bps hike is widely expected by the market, see our full preview here for more details. Recall around the last 2 RBA meetings the AUD correlation with yields has become more elevated.
  • AU-NZ spreads have moved higher in AUD's favor. The 2yr swap spread is back to -47bps, close to mid-June highs. This has helped the AUD/NZD cross rebound from 1.0960/65 to back above 1.0980. There could still be further to run on this basis.
  • AUD/JPY has also rebounded back to 92.40. Note the 50-day MA comes in at 93.44.
  • Commodities remain a headwind, with iron ore holding near the session lows at close to $109/tonne. Oil and gold are higher from early lows though.
  • Still, the Australian Department of Industry, Science and Resources expects the current financial year (July 1 2022 to June 30 2023) to be another record for country's resource and energy export earnings.
  • Export earnings are expected to rise to $A419bn versus $A405bn in the financial year just completed, before falling to $A338bn in 2023/24 (see this link for more details).