📝 All Inputs to Our AUD/USD Model Are Tilted Bearish For First Time Since March: Westpac Strategy

Matching that, our short-term AUD/USD model shows that there has been no real easing of pressure on the currency when it comes to the China “mood”. We incorporate the China “mood” by using Bloomberg’s China stress index (red bars), and as slide two shows this headwind has not subsided at all in recent weeks. In a nutshell, China flatters to deceive.

Problematically, all our other inputs to our AUD/USD model – yield spreads, commodity prices, broad USD trends and global market volatility are still tilted bearish, for the first time since at least late-March

Q3 US growth pulse is running well above trend, north 3.5%+, payrolls have rebounded beyond the most optimistic of projections and partial indicators suggest US core CPI this week is more likely to print at least as strong as consensus at 0.3%. Against that backdrop, much of the lift in US real yields is underpinned by a re-rating of US resiliency and is sustainable.

- Westpac Strategy