A$ Rebounds, But Weak China Steel PMI Curbs Iron Ore

AUD/USD wasn't able to hold above 0.6900, but dips have been fairly shallow. We last tracked 0.6890 and are comfortably up from the session lows of close to 0.6850.

• Better local data, coupled with the China PMI beat (for non-manufacturing) has helped push yield differentials away from recent lows. The AU-US 2yr spread sits back at -37bps, versus -42bps low.
• Yield momentum has also been positive against the NZD, with the AUD/NZD cross pushing above 1.1080, +0.20% on the day.
• Other cross assets signals are more mixed. Regional equities are generally under pressure outside of China. US futures are also in the red.
• Commodities are also less supportive. Iron ore dipped to $120/tonne before support kicked in. Onshore China coal prices are also down a touch.
• Note the China steel PMI fell sharply in June to 36.2 from 40.9 in May. This is a decade low. New orders also fell sharply to 25.9 from 32.4. New export order orders did improve though. Higher steel related inventories are a headwind for the sector.