AUD/USD Sees Abrupt U-Turn Lower

The initial impetus for AUD/USD was higher post the Asia close. The pair got above 0.6955, as broader USD sentiment suffered. From there though it was one-way traffic back to the downside, falling 100pips to under 0.6850 late in NY trading. We currently sit at 0.6850/55. Note we aren't too far away from Monday's lows of close to 0.6840.

• The abrupt overnight u-turn in the A$ reflected the USD finding a base, although AUD/EUR is still down close to 0.90% over the past 24 hours. This pair is now back to 0.6840/45, versus recent highs at 0.7000.
• Weakness in commodity prices weighed on the AUD, along with the rest of the commodity FX bloc. The Bloomberg aggregate index down -2.42%, while base metals lost -2.35%. Iron ore is sub $98/tonne as well. Headwinds for China's steel sector seemingly the main driver of this move.
• The roll over in equities didn't help the A$ either. Main US markets lost a little over 1%, while the VIX index finished unchanged at 26.21%, albeit with an intra-session move above 27%.
• Core yields were mostly higher, although the EU/UK outperformed US moves. The US 2yr finished at 3.44%. The AU-US 2yr spread has trended down over the past 24 hours, back to a -40bps handle.
• On the data front today, Q2 construction work done is out, which is a building block for Q2 GDP (out next week). The market expects a 0.8% rise, versus a -0.9% dip in Q2. Also out is private sector credit figures for July. The consensus is for a 0.7% MoM gain (+0.9% in June), which take the YoY pace to 9.0% (from 9.1% previously).