Yields

With US yields lower and hinting at a swing high, the relationship between AUD/USD and the AU-US 2-year spread appear to be back on talking terms. And that could bode well for AUD/USD bulls if US yields continue to fall in line with my bias.

The combination of tariff fatigue, extended moves and a refreshing set of softer CPI figures helped appetite for risk peel itself from the ropes it had been pinned to in recent weeks. And that helped AUD/USD rise for a second day and USD/CAD fall below resistance, while EUR/USD bulls paused for breath around a key high.

It's not every day you see gold plunge alongside yields. But that is what Monday served on reports of a potential ceasefire in Gaza and Trump's picking a relatively 'safe pair of hands' for the US Treasury Secretary role. With a prominent swing high on gold, I suspect it could be headed much lower from here.

The expected 25 cut was delivered. But the Fed were understandably cautious regarding future cuts, given they don't know which or how many of Trump’s inflationary policies will see the day of light. And that means the current pullback on the USD and yields could be limited.

With Trump leading in some polls and Fed members continuing to push back against a faster pace of easing, bond traders were quick to send yields and therefor the USD higher. USD/JPY now has 152 within sight.

AUD/USD was sent lower for a fifth day while Wall Street indices fell and the VIX rose during a risk-off start to the week.

AUD/USD finds itself with a typical day's trade of 69c ahead of Australia's CPI report, while the USD index seriously considers a break of 100.

If the 2-year yield is right, it suggests the USD could be set to rise over the near term. And I suspect that PCE inflation could be the trigger. For now, risk off tones are in the air.

A surprise rise in US wage pressures weighed on sentiment on the eve of the Fed meeting, sending the US dollar broadly higher, Wall Street lower as AUD/USD suffered its second worst day of the year.

Momentum turned higher for the US dollar on Friday and the US 2-year is reconsidering a break above 2%, which could see them close the gap with the CRM commodities index - which have led both markets higher this year.

The US 2-year bond yield remains support, which is capping the yield at 5% and weighed on the US dollar. And that helped AUD/USD rise for a second day ahead of a key AU CPI report.