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AUD/USD Off Highs, But Yields Differentials Trending Higher

AUD

AUD/USD sits slightly below session highs, the pair last 0.6675/80. We hit fresh highs earlier around 0.6690. Resistance at 0.6710, the May 16 high remains intact for now. Post RBA lows from Tuesday's session came in close to 0.6640.

  • RBA Governor Lowe's speech and Q&A hasn't impact FX sentiment a great deal. The main hawkish message from yesterday's +25bps outcome, with potentially more to follow, was largely reiterated.
  • AU yields are higher, with AU-US government bond yield differentials continuing to track in favor of the A$. The 2yr spread last at -62bps, close to YTD highs, while the 10yr spread is around +15bps, also close to YTD highs.
  • The slight Q1 GDP miss (0.2% q/q, versus 0.3% expected) didn't impact sentiment.
  • Some A$ weakness has likely filtered in from lower AUD/JPY levels. This pair has moved down from recent highs, last near 93.00. USD/JPY is offered slightly, while Japan equities were off more than 1% at one stage.
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