AUD/USD Back To 0.6930, Unwinds Some Cross Gains

The early dip in AUD/USD sub 0.6890 was supported (avoiding a test of the July 21 low) and we are back to 0.6930 now. The pair ran out of steam ahead of 0.6940 and also unwound some gains on a cross basis though.

• Cross asset signals have been positive for the most part. Equities are higher in the region and US futures are posting small/positive gains. We also had a much better than expected Caixin services PMI print in China (55.5 versus 53.9).
• AU yields have bounced, with the AU-US 2yr spread back at -42bps, albeit still below yesterday's highs of -35bps.
• AUD/NZD has backed away from the 1.1100 level (last 1.1080), but the pair is more in line yield differentials compared to the start of the week. The AU-NZ 2yr government bond spread has surged +15bps today to -60bps, we were closer to -100bps a few weeks ago. On a 2yr swap spread basis, around +10bps for the day.
• Weaker NZ jobs figures has hurt NZD, while Q2 retail sales volumes were slightly better for AU (1.4% versus 1.2% expected), although spending is expected to moderate as we progress through H2.
• AUD/JPY is down from earlier high. We got close to 92.60, but is now back to 92.10.
• Commodities are mixed, copper (CMX) is down 0.60%, while iron ore is just below $114/tonne. Onshore steel prices in China are higher by +1.7% at this stage.
• Tomorrow the domestic data focus will be on the June trade balance.