AUD/USD hits two-week lows as Australian bond yields slide

• AUD/USD slips to two-week lows below 0.6950.
• Aussie 10-year government bond yield hits a record low.  

The Australian Dollar is feeling the pull of gravity at press time likely due to record lows in Australian government bond yields.

AUD/USD is currently trading at 0.6945, representing moderate losses on the day, having hit a low of 0.6941 a few minutes ago. That was the lowest level since July 10.

Australia's 10-year government bond yield fell to a record low of 1.226% earlier today. The two-year yield, which is more sensitive to short-term interest expectations, also hit a lifetime low of 0.877% in the overnight trade.

Notably, the 10-year yield has dropped by more than 10 basis points in the last ten days and the two-year yield has shed close to 13 basis points.

This could be the reason behind AUD/USD's bearish reversal from the July 19 high of 0.7082 and the drop to two-week lows.

Looking forward, the Australian Dollar could drop further as Aussie yields are showing no signs of life. The odds of aggressive easing by the US Federal Reserve will likely drop, sending the USD higher if the US second-quarter GDP, due at 12:30 GMT, betters estimates by a big margin.

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