AUD/USD inter-market: Ignores improved risk tone, S&P outlook downgrade weigh

AUD/USD traded quite choppy so far this Thursday, swinging between gains and losses amid improved risk conditions and mixed fundamentals.

Having recovered from a dip to 0.7468 in early, the Aussie is seen trying hard to sustain above 0.75 handle as reports of S&P’s downward revision of Australia’s sovereign credit outlook continues to dampen the sentiment around the AUD. Additionally, tumbling copper and iron-ore prices also keep any recovery short-lived in the major.

Copper prices extend weakness for the fourth straight session as inventories of the industrial metal hit a five-month high, reflecting slack in demand. While iron-ore futures fell back in the red in response to persistent worries over steel supply glut and slow physical demand in China.

However, the Aussie finds support from a major turnaround in risk sentiment during the European trading hours amid the European stocks rebound and higher oil prices, which benefits the higher-yielding currencies such as the AUD.  The Volatility Index (VIX), risk barometer) dropped sharply over the last hours, underpinning the AUD bids.

More so, the downside also remains cushion on the back of the yield spread between the Australian 10-yr government bond yields and the US 10-yr treasury yields remaining in favor of the Australian dollar.

Looking ahead, it appears that the major is in search of fresh incentives for next direction, and that could be Friday’s non-farm payrolls data from the US.