A$ Correlations Back To Global Drivers

A$ correlations have shifted somewhat over the past week. Yield spreads have dipped as a driver, with all the short-term correlations dipping over the past week into negative territory, see the table below. Correlations with global commodity prices and equities remain around recent highs though.

• The longer monthly correlation is still positive for yield spreads, particularly at the front end. Note as well, yield spread correlations tend to rise around RBA decisions, with next week's decision out on Tuesday. The market consensus though is firmly on a 50bps hike, with more focus likely to be on the outlook.
• Beyond this though, global drivers are likely to remain fairly dominant. Further risk assets gains are likely if the AUD is to establish a foothold above the 0.7000 level.

Table 1: AUD/USD Correlations

Source: MNI - Market News/Bloomberg