AUD/USD's move above 0.6500 late yesterday quickly ran out of steam, and we printed fresh lows overnight. The pair got to 0.6414 amidst a broad based USD recovery (DXY back through 114.00). We now sit a little higher at 0.6430/35. Lows from May 2020, at 0.6373, are in play though. On tap today is retail sales, +0.4% expected for the August print, against +1.3% prior.
- The general bias is that spending will moderate under the weight of tighter financial conditions. To date though, spending has remained resilient to such tightening and much weaker consumer sentiment readings.
- The A$ was the worst performer in the G10 space through Tuesday's session. Cross asset signals weighed, although equity weakness wasn't as bad as previous sessions. The US VIX index closed higher (32.58%), but moved away from intra-session highs of 34%.
- Outside of energy, commodities were mostly on the back foot. The aggregate Bloomberg indices finished lower, particularly for base metals (-1.18%). The base metals index is now back at July YTD lows, see the chart below.
- AU yield spreads with the US remain range bound, although as we noted yesterday, short term correlations with AUD/USD are negative now.
Fig 1: AUD/USD & Base Metals
Source: MNI - Market News/Bloomberg