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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUD
A$ correlations, on a short term basis, with yield differentials have rebounded. The table below presents the correlations for the past week and month (in levels terms) for AUD/USD against traditional macro drivers.
- Our last update had short term correlations with yield differentials in negative territory. As is usually the case though, the correlations have picked back up during RBA week.
- Yesterday's dovish RBA hike has also likely increased focus on the yield differential outlook from an AUD standpoint. The AU-US 2yr spread is threatening to break sub -100bps. We have spent little time below this level from an historical standpoint, see the second chart below.
- AUD/USD correlations with commodities and equities are generally lower compared to late September. We remain in positive territory for the most part though.
- The most notable pullback is for iron ore, although China onshore markets are closed this week.
Table 1: AUD/USD Correlations (Levels)
| 1wk | 1mth | |
| 2yr yield differential | 0.55 | 0.62 |
| 5yr yield differential | 0.52 | 0.58 |
| 10yr yield differential | 0.57 | 0.48 |
| Global commodity prices | 0.47 | 0.89 |
| Base metals | 0.13 | 0.81 |
| Iron ore | -0.55 | 0.78 |
| Global equities | 0.59 | 0.97 |
| US VIX index | -0.53 | -0.95 |
Source: MNI - Market News/Bloomberg
Fig 1: AU-US 2yr Government Bond Yield Spread
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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