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A$ Following Global Drivers


A$ correlations have remained elevated over the past week. This is evident across yield spreads, particularly at the short end, as well as with global commodities and equity trends.

  • The table below plots correlations for the past week and month across these traditional key macro drivers.
  • The yield spread correlation has likely remained elevated given US moves post the CPI print/Fed commentary this week. Note next week contains some important AU event risks, RBA minutes are out Tuesday, followed by Q2 wages on Wednesday. Then on Thursday is jobs data for July. The wages/jobs mix arguably carries the most domestic risk that can shift the AU yield outlook.
  • The correlation with global commodities remains strong, as it was last week, but less so iron ore, where prices have been more range bound, while the A$ has continued to rally this past week.
  • The currency is also back in lockstep with global equity sentiment, see the chart below, after a brief divergence through early August.

Table 1: AUD/USD Correlations

2yr yield differential0.940.31
5yr yield differential0.760.16
10yr yield differential0.460.01
Global commodity prices0.850.86
Iron ore0.180.63
Global equities 0.900.85
US VIX index-0.83-0.83

Source: MNI - Market News/Bloomberg

Fig 1: AUD/USD & Global Equities

Source: MNI/Market News/Bloomberg

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