AUD/USD intermarket: consolidation during market stability, watching EFFR
|AUD/USD is stabilizing again after a period in March where the VIX dropped, supportive of the Aussie's strength and a seven cent rally to 0.7829 which was then shattered by the Fed's upbeatness around the US economy in late April along with the RBA's interest rate cut and downgrade of inflation forecasts. Subsequently, we had a strong rise in the Expected Fed Fund Rate (EFFR) creating a divergence between the AU10Y and US10Y again after a brief period of convergence.
While Gold and copper have been in a period of heavy decline since the end of April, Oil has been making its way back towards $50bbl crude, but this has diverged from the performance of the Aussie moving more in tandem with the industrials and adding more weight to the impact of market expectations for a Fed hike and the recent stability in the market volatility seen through the VIX.
Further reading in respct to the Fed: Déjà Vu: Will the Fed actually hike?
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