Renewed focus on yield spreads chipping away at AUD/USD - Westpac

AUD’s commodity price support edged up this month, with the Westpac Australia Export Commodity Index (WCFIAECI on Bloomberg) at highs since May, points out Sean Callow, Research Analyst at Westpac.

Key Quotes

“Coking coal prices have been important, helped by reduced supply and resilient demand. And spot iron ore prices are at 2 month highs.”

“The renewed focus on yield spreads seems to be chipping away at AUD/USD despite the improving commodity price support. This should remain the case near term, with USD potentially finding support from the US tax reform push and the Fed’s upbeat narrative ahead of Dec 12-13.”

“But AU yields could also find support if Australia Q3 GDP rebounds to >3%yr, a comforting number for the RBA into the summer break. This should leave AUD/USD ranging from 0.7540/50 to 0.7650/75.”