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Goldman with the note. AUD: Back to the beta. Rising equity prices have been the primary driver of easier financial conditions this year, despite a brief reversal in April. AUD tends to be the most high-beta of the G10 currencies, with the strongest correlation to higher equity prices, and typically outperforms in this type of environment. However, we have previously shown that despite this pro-cyclical environment, AUD had been one of the worst performing currencies in the G10 through the first quarter of the year. Advertisement We found that negative Chinese growth expectations and Chinese equity underperformance helped explain a meaningful share of AUD's underperformance, counterbalancing AUD's typical equity beta. And, while greater cyclical optimism tends to be the environment most beneficial for AUD, rising yields through the start of the year likely weighed on the impulse from positive growth repricing. More recently, though, AUD has reestablished itself at the front of the pack, outperforming its G10 peers since March. Advertisement Our models now show AUD performing in line with our BEER model implied returns, supported by a pickup in Chinese equity performance (Exhibit 3). Lower yields, even if they remain more range-bound from here, should also allow AUD to perform more in line with its traditional beta to equities. With the factors that had been keeping AUD under pressure looking somewhat mitigated for now, we expect to see continued AUD outperformance as equities rally, more consistent with AUD's historical performance in a pro-cyclical macro backdrop. Advertisement That said, the market is becoming increasingly focused on a potential slowdown in US growth, so while our economists are more positive on the outlook, there may be some near-term pessimism priced that could weigh on equities and therefore AUD over the very short term if US data continue to look softer. Advertisement Chinese growth is not coming back and equities are massively overbought. Still, I expect a firmer AUD on the back of softer US growth and Fed cuts. Unless or until it turns hard landing.