The Australian dollar is under pressure as bond yields soar

Andrew Savulich/NY Daily News Archive via Getty Images
  • The AUD/USD fell heavily on Tuesday as US bond yields soared.
  • The yield on US 10-year notes hit a high of 3.09%, a level not seen in seven years.
  • Australia will release wage growth data today — a report than could prove to be influential given the implications for GDP growth and inflation.

The Australian dollar fell heavily against the greenback on Tuesday, undermined by another increase in US bond yields which scaled fresh multi-year peaks.

However, while that saw the AUD/USD fall back below 75 cents, as seen in the scoreboard below at 7am in Sydney, the Aussie fared better against the major crosses.

AUD/USD 0.7471 , -0.0054 , -0.72%
AUD/JPY 82.44 , -0.07 , -0.08%
AUD/CNH 4.7554 , -0.0124 , -0.26%
AUD/EUR 0.6310 , 0.0002 , 0.03%
AUD/GBP 0.5530 , -0.002 , -0.36%
AUD/NZD 1.0886 , 0.0002 , 0.02%
AUD/CAD 0.9614 , -0.0027 , -0.28%

As has been the prevailing theme over the past month, the broader moves in currency markets on Tuesday were dictated by bond markets with the yield on benchmark 10-year US notes hitting a high of 3.09%, the loftiest level in seven years.

While the move coincided with the release of reasonable US retail sales data for April and hawkish commentary from several US Federal Reserve officials, David de Garis, Economist at the National Australia Bank, believes the move was driven by other factors.

“It was not a stellar tax cut-driven US Retail Sales report for April, nor more aggressive rate hike views from John Williams, nor any overtly hawkish soundings from Fed Governor nominees Clarida and Bowman who were appearing before the Senate Banking Committee overnight with seemingly measured statements,” he said in his morning report.

“Perhaps it’s been a re-evaluation of the relative attractiveness of the US yield story and momentum/technical-driven moves.”

Whatever the reason, it certainly helped the US dollar which ripped higher during the session, helped by the lift in yields and further soft economic data from Europe which weighed upon the euro.

A such, the AUD/USD currently sits at .7471, more than one cent below the high struck late last week.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, there’s a raft of important data releases due out both in Australia and abroad.

Locally, the main event comes from the release of Australia’s March quarter Wage Price Index (WPI) at 11.30am AEST. A quarterly increase of 0.6% is expected, leaving the increase on a year earlier unchanged at 2.1%.

While not traditionally a market-mover, this 10-second guide explains why that may not be the case today.

Aside from the WPI, the latest Australia Westpac-MI consumer sentiment report for May will arrive at 10.30am AEST.

Outside of Australia, regional highlights today include Q1 GDP from Japan and Chinese new home price data for April. The former arrives at 9.50am AEST, the latter at 11.30am AEST.

Later in the session, markets will receive CPI data from the eurozone, Germany and Italy along with building permits, housing starts and industrial production figures from the United States.

It will also be a busy day for central bank speeches with Draghi, Coeure and Praet from the ECB, along with Bostic and Bullard from the US Fed, all scheduled to be in action.

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