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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
AUD/USD continues to see support sub 0.6370, the pair benefiting from a modest USD pull back so far in Friday trade (the BBDXY last down 0.10% to 1256.3, which is up from session lows). The A$ sits near 0.6385 in latest dealings, unable to breach the 0.6400 level yet. The 20-day EMA sits around 0.6450.
- The AUD has seen modest relief from a slightly improvement in forward monetary policy expectations between AU and the US. The chart below plots spot against the AU-US expected 3 month differential in 1 year's time. The correlation with AUD and this differential sits at 88% for the past 3 months.
- In contrast we sit at around 50% for the equivalent correlation between base metals (which is the other line on the chart) and AUD. The correlation between AUD and iron ore is negative over this period.
- China's NDRC noted that the recent spike in iron ore prices had occurred without any change in fundamental demand/supply conditions. Iron ore also sits high relative to China property equity trends.
- If current correlations persist, relative policy expectations may remain a key driver for AUD/USD. in terms of upcoming event risks, next week's US CPI looms large. In Australia next week contains consumer and business sentiment, then August employment data.
Fig 1: AUD/USD Versus AU-US 3m 1y & Base Metals
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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