Firmer US Yields Halts Yen Rebound, AUD/NZD To Fresh Highs For May

The BBDXY has largely respected recent ranges. We last sat at 1245.40, against earlier highs near 1247. Some optimism emerged post the US House passing the debt ceiling agreement, but there wasn't much follow through. If anything, the USD index has slightly underperformed the firmer US yield backdrop. The 2yr sits just off session highs at 4.43%.

• The debt deal and the better Caixin China PMI have aided US yield moves. This has also helped USD/JPY move comfortably off fresh lows sub 139.00 (which printed early), with the pair back to 139.45/50. Better Q1 Capex data is likely to see Q1 GDP revised higher, but the data didn't have a meaningful impact on FX sentiment.
• AUD/USD was sub 0.6500 early, but now sits back closer to 0.6520. Higher commodity prices post the China data has helped, as has better than expected Q1 Capex figures locally. The AUD/NZD cross is trading at fresh highs for May, last near 1.0840.
• NZD/USD has lagged, last near the 0.6010/15 region, although we haven't moved back below 0.6000 so far today.
• Looking ahead, focus shifts to German retail sales on Thursday morning before the final manufacturing PMI reads for May. Attention will then be on the Eurozone Flash estimate of CPI which is expected to come in at 6.3% Y/y. This will be the final read before the June 15 ECB meeting. US ADP and the ISM Manufacturing PMI highlight the docket before Friday’s key employment report.