A$ Still Riding Risk-On Wave

AUD outperformance continued post the Asia close on Friday. The DXY rose 0.5% through Friday's session, while AUD/USD edged up 0.20%. Ranges were tight in AUD/USD, with dips sub 0.7100 supported. The pair has started this week in a 0.7110/20 range. AUD/EUR is above 0.6930, which is fresh highs back to early April, while AUD/JPY is back above 95.00.

• The risk on tone to equities continues to help A$ sentiment. The S&P500 up 1.73% on Friday, while the VIX slipped to 19.50%, fresh lows back to early April. Global equities are up around 13-14% since mid-June lows, as recession fears have ebbed somewhat.
• Higher US yields, at the front end, didn't dent AUD sentiment too much and helped outperformance on crosses. Continued hawkish Fed rhetoric helped drive the move, along with generally better than expected data outcomes. In any event AU-US 2yr spreads ended last week close to -30bps, which is around multi-week highs.
• Softer commodity prices didn't hurt A$ sentiment too much. Base metals were weaker across the board, with the Bloomberg aggregate index down by 2.4%. Iron ore is back sub $110/tonne, while Brent crude also eased off recent highs. A firmer USD against the majors didn't help, although much weaker than expected China aggregate finance data, released late on Friday, was another headwind.
• Today's data calendar is empty in Australia. Tomorrow the CBA household spending measure prints, along with the RBA minutes. On Wednesday Q2 wages is out, then Thursday delivers July jobs data.
• There will be some focus on China activity data for July, which prints today, along with the latest MLF operations.