The Reserve Bank of Australia’s (RBA’s) policy statement is dovish and AUD-negative, with the central bank unwavering in its accommodative stance.

The main thrust of the statement is in keeping with the central bank’s move Monday to calm higher yields by stepping in more aggressively than expected.

Relative yield differentials are a headwind for AUDUSD, with the pair needing renewed strength in commodity prices to rally once more. Rates vs commodities are the battleground for the AUD in 2021.

Central banks will run at different speeds in pulling away from last year’s crisis.

The US dollar is catching a bid from weaker Asian equities. The People’s Bank of China (PBoC) earlier expressed concern about bubbles in overseas financial markets and the domestic property sector, implying that policy will be less accommodative going forward.

This indicates how sensitive markets are to policy accommodation being taken away. It also highlights that central banks will run at different speeds in pulling away from last year’s crisis.

Commodities should not like the sound of a hawkish PBoC. Mainland China has already built a lot of housing and infrastructure, and now the current stimulus is not expected to be a longer-term building programme.

China’s debt levels have already gone from low to high, and this process is not set to be repeated. China’s growth is shifting towards the services sector and technology. Even China’s Belt and Road programme has slowed. I suspect air will start to leak out of the supercycle trade.

Market analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi