AUD: The RBA is relieved of some of its burden as a result of the bond rally.

Following a mix of choppy risk appetite and rallying yields, the AUD/USD climbed back above 0.7600 but is down 1.5% on the week. On the above, the Reserve Bank of Australia would have welcomed the 10 basis point decline in the Australian 10-year yield this week, bringing the 10-year yield differential below 4 basis points, the lowest since early February – and a significant drop from the 50 basis point peak seen in late February. For the time being, this reduces the need for additional RBA bond market interventions, but we don’t rule out the possibility that more will be needed in the coming weeks if global bond yields begin to rise again.

In Australia, the data calendar is light this week, with only February trade figures worth mentioning. The emphasis should continue to be on the oil market and its consequences for other commodities. This week, iron ore witnessed a corrective rally to US$167/mt, aided by a brighter activity outlook for China. The EU-Australia conflict over vaccine supplies to Papua New Guinea, and the floods in Sydney and NSW, which could delay vaccination efforts, are two other threads to watch, though their market effect has arguably been muted so far.