A$ Correlations Fall

AUD/USD correlations with traditional macro drivers have faltered over the past week or so. The table below presents AUD/USD levels correlations with a number of variables, for the both the past week and the past month.

• Across the board correlations are lower, except for iron ore. Correlations with yield differentials remain positive, particularly at the short end, but are down from recent highs.
• The general trend in yield spreads has been in favor of the AUD, with the AU-US 2yr spread back sub -30bps, from recent wides beyond -50bps. AUD/USD has been broadly range bound over this period though
• The bigger correlation drops are evident for both global commodities and global equity market trends. The correlation with global commodities has slumped into negative territory from a short-term standpoint, but interestingly is noticeably higher for iron ore compared to our last update.
• For global equities the correlation has dipped but remains in positive territory.

Table 1: AUD/USD Correlations With Key Macro Drivers

Source: MNI/Market News/Bloomberg