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AU-US Yield Spreads the Driver, Will it Steer AUD/USD Up?


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AUTRALIAN DOLLAR FORECAST: NEUTRAL

  • The Australian Dollar has rallied on beneficial threat setting
  • Commodities flux as inter-market relationships ricochet provide points
  • These with quickest rising yields win. Will AU-US spreads raise AUD/USD?

Going into the top of the week, AUD/USD was trying to soften up after some stable features on Tuesday and Wednesday. Then Evergrande made a US$83 million bond coupon cost and market perceptions round threat property modified course to a level.

Covid restrictions are easing throughout Australia with Victoria popping out of 1 the longest lockdowns on the earth. When this occurred in This autumn final yr, GDP noticed a powerful decide up.

Commodity volatility has unfold with vitality costs spilling over into different elements of the commodity complicated. Industrial metals rallied laborious earlier than easing off into the top of the week.

With vitality costs as excessive as they’re, the price of steel manufacturing will increase. Moreover, in some elements of the world which can be experiencing blackouts, vitality rationing can lower smelting precedence. That is on high of provide chain points as the price of delivery stays at elevated ranges.

Australian 10-year yields continued to rise via the week, sooner than their US counterparts. That is depicted through rising yield spreads within the chart beneath. This unfold might proceed to play a task in AUD/USD course.

Australian CPI is due on Wednesday and it will should be nicely outdoors of expectations to change the RBA coverage agenda. Not less than it would present attention-grabbing info on the influence of lockdowns on financial exercise. Market expectation for headline CPI is 3.1% y/y and trimmed imply CPI at 1.8% y/y.

Producer Worth Index (PPI) knowledge is due on Friday and wouldn’t usually acquire an excessive amount of consideration. Nonetheless, earlier this month we noticed China PPI print at 10.7% y/y towards CPI of 0.7% y/y.

Commonplace financial principle means that the excessive costs companies pay in the present day, are more likely to translate into greater costs that their clients pay additional down the monitor. Retail Gross sales are additionally due on Friday.

AUD/USD AGAINST AUSTRALIA-US 10-YEAR YIELD SPREAD

Australian Dollar Outlook: AU-US Yield Spreads the Driver, Will it Steer AUD/USD Up?

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @DanMcCathyFX on Twitter





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