Fresh Session Lows For AUD/USD As China Tensions And U.S. Dollar Strength Weighs

Keeping an eye on AUD/USD as the pair falls to fresh session lows of 0.7518, compared to Asia session highs of 0.7546 and Monday's high of 0.7578.

• Headline flow is light, the RBA released minutes of its December meeting earlier and said it would keep bond purchase programme unchanged but is prepared to do more if necessary. The board also noted that there is still a significant amount of spare capacity in the economy and the labour market.
• The RBA noted that it is cognisant of risks from tensions with China. There were reports on Monday that China intended to enforce a ban on coal imports from Australia, and that the iron ore market was also under scrutiny. Continued tension is likely to weigh on the pair, even after Australia Trade minister Simon Birmingham played down the most recent reports.
• Data from China was in line with expectations, industrial production rose 7% while retail sales rose 5%, but is unlikely to change sentiment in the region.
• A blip higher in the U.S. dollar index is also dragging down AUD/USD, DXY last just off session highs at 90.686, but still down slightly from yesterday's close. The driver of U.S. dollar strength appears to be fresh Covid concerns as markets digest reports that New York could be facing a fresh lockdown and that London is be put into the tier 3, the tightest restrictions.