AUD/USD correlations remain mixed with key macro drivers. The table below plots the levels correlation between the A$ and key macro drivers over the past week and month (note the yield spread variables are based off government bond yield differentials).
- For yield differentials, correlations are slightly lower over the past week. This is consistent with the recent RBA meeting now being behind us. Still, correlation levels remain positive, although more so for the past month.
- The trend in AU-US yield differentials has been broadly sideways the past week.
- Correlations with aggregate commodity indices is high, although much less so for base metals and iron ore. The correlation with iron ore over the past month is back to flat.
- The wedge between iron ore prices and AUD/USD has grown, see the Figure 1 below. As the chart suggests, the longer term correlation between the two series has been quite strong.
- A$ correlations with global equities remain quite firm, as signified by today's rebound in AUD, which is line with the firmer US equity futures tone.
Table 1: AUD/USD Correlations (Levels)
| 1wk | 1mth | |
| AU-US 2yr Spread | 0.15 | 0.70 |
| AU-US 5yr Spread | 0.44 | 0.82 |
| AU-US 10yr Spread | 0.26 | 0.76 |
| Global Commodities | 0.78 | 0.87 |
| Global Base Metals | -0.63 | 0.83 |
| Iron ore | -0.51 | -0.01 |
| Global equities | 0.85 | -0.04 |
| US VIX index | -0.59 | -0.64 |
Source: MNI - Market News/Bloomberg
Fig 1: AUD/USD & Iron Ore Prices
Source: MNI - Market News/Bloomberg
