A$ Stabilizes Post CPI Dip, Retail Sales on Tap Tomorrow

AUD/USD found some support sub 0.6920 during its post CPI dip. We last tracked just above 0.6930. Sentiment has also stabilized on crosses, with AUD/NZD (1.1115/20) and AUD/JPY (94.95) both rebounding. AUD/EUR is lower though, down 0.4% for the session and not too far away from the session lows just above 0.6830 presently.

• The move lower in AU yields has been fairly uniform, although slightly larger at the front end, with 2yr close 12bps to 2.55%. This puts the AU-US2yr spread back to -44bps, a 10bps dip for the session.
• For 2022, we have had 19 sessions where the 2yr AU-US yield differential has dropped by 10bps or more. The average drop in AUD/USD is 0.16% for these sessions, although the variability of outcomes is, not surprisingly, quite wide. So far AUD/USD is within these ranges.
• In the commodity space, iron ore has edged a little higher ($111/tonne,) while onshore steel is higher in China, despite fresh covid concerns. Copper, on a CMX basis, is a touch higher.
• Note the data calendar holds retail sales for June tomorrow, along with 2q export and import prices. The market expects +0.5% for retail sales, versus +0.9% last month.