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It's a damp end to a tough week for the Australian Dollar as a fall in commodity prices weighs on global FX's premier 'commodity currency'.

The Australian Dollar was lower across the board amidst falls in most commodities, particularly those Australia exports.

Kristina Clifton, a strategist at Commonwealth Bank of Australia, says the Australian Dollar was lower after "commodity prices fell".

A look at the dashboard reveals copper - often a bellwether for the broader industrial commodity complex - was down 1.65% on Friday in what amounts to the largest fall since May 24.

From a technical perspective, the fall could signal the Aussie Dollar's June rally is coming to an end.

A look at the below chart shows the correlation between the Australian Dollar-U.S. Dollar exchange rate and copper:

Above: AUDUSD and copper prices (bottom).

The above would suggest the Aussie is being led by the downturn in commodities and helps explain the rise in the Pound to Australian Dollar exchange rate (GBPAUD) back to 1.90.

"Commodity prices fell sharply across the board. On top of renewed concerns about the global economy, the absence of a major stimulus announcement from the Chinese government also weighed on AUD. These forces are likely to remain in play in the near term and drag on AUD," says strategist Carol Kong at Commonwealth Bank of Australia.

John Meyer, head of research at brokers SP Angel, says the down-move in commodity prices coincides with a front-page article in Chinese state media calling for further stimulus.

This highlights once again how Chinese sentiment remains critical to commodities and by extension Australia. The lacklustre rebound in Chinese activity in 2023 has disappointed those who were expecting a major rebound at the start of the year, reflecting the country's emergence from Covid.

But Meyer notes the pullback in commodities also follows a strengthening dollar on Powell and Federal Reserve hawkishness.

"Powell testified to Congress again yesterday, calling for potentially two more rate hikes this year and dismissing expectations/hopes of a cut," he says. "Short-duration treasury yields have climbed to their highest since March amid the SVB crisis, although the 10-year yield has eased from highs made on the 21st of May."