AUD Extends Rebound

AUD/USD spent most of the post Asia-close rebounding. We tracked as high as 0.6890, before we settled back a little above 0.6860, which is where we currently sit.

• Only NOK has outperformed the AUD in the G10 FX space since the start of the week. AUD/USD is up 0.75% for this period.
• Cross asset signals were mixed overnight, with liquidity lighter as US markets were absent due to the Independence Day holiday. EU equities edged higher (+0.12%), but US equity futures stayed in the red (-0.36% for the S&P500), albeit away from worse levels from yesterday.
• Several newswires reported that US President Biden could deliver US-China tariff relief this week, which had a positive spill-over effect for AUD.
• EU yields rebounded strongly, which aided A$ performance on crosses, most notably AUD/JPY. AUD/NZD also rebounded further, rising above 1.1060. This was in line with AU front end yield outperformance yesterday.
• In the commodity space, iron ore recovered back to $112/tonne, after dipping as far as $107/tonne. Copper remained on the back foot though, losing a further 0.57% to be back at early 2021 lows. Oil pushed higher.
• Today is all about the RBA. A 50bps hike is not fully priced by the market, so we could see modest A$ support on a 50bps hike, but this is expected by nearly all economists surveyed by Bloomberg (see our preview here for full details). More interest is likely to rest with the accompanying statement in terms of the outlook.