AUD/USD has been notably quiet - Westpac
|Sean Callow, Research Analyst at Westpac, explains that after having avoided a break of 0.70 early this month, AUD/USD has been notably quiet, largely ignoring equity swings and with limited inspiration from interest rate differentials.
Key Quotes
“Since the surge in US yields at the start of October, the 2 year AU-US yield spread has chopped around -80bp to -90bp while the 10 year spread has also ranged, -40bp to -50bp.”
“Of course there’s nothing bullish for AUD about such spreads, especially as the trend should continue. But AUD is the weakest G10 currency over the past 3 months, so surely plenty of bad news is priced in.”
“Meanwhile, Australia’s unemployment rate is at a 6 year low of 5%, exports are growing at 15%yr and the commodity rally is not just prices but in some cases volumes too. So there remains a fundamental case for AUD/USD recovery but even if the government retains its majority after the by-election, A$ probably needs a further catalyst to break the 50dma at 0.7208.”
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