Risk-Off Feel Bites, Domestic Markets Closed

Upticks in COVID-19 numbers in Beijing and Shanghai as well as generally downbeat commentary around the virus situation in the two megacities have created a headwind for risk at the start to the new week. Coupled with the carry-over from market reaction to above-forecast U.S. CPI figures released Friday, this has rendered the Aussie dollar the worst G10 performer.

• Fallout from broader risk backdrop (VIX index up, equity markets in the red) and commodity markets (Bloomberg Commodity Index slipped) applied pressure to the Aussie dollar last Friday, with early Asia-Pac trade showing no clear signs of this risk-off impetus letting up.
• Domestic financial markets are shut in observance of a public holiday, with obvious implications for AUD liquidity.
• Spot AUD/USD trades at $0.7025, down 33 pips on the day and through the prior day's low, with bears setting their sights on May 18 low of $0.6950. Bulls need a clearance of Jun 9 high of $0.7202 before taking aim at Jun 3 high of $0.7283.
• Implied volatilities are up across the curve, with participants preparing for Wednesday's FOMC monetary policy decision & Thursday's Australian labour market data.
• Local data highlights this week include CBA Household Spending & NAB Business Confidence (Tuesday), Westpac Consumer Confidence (Wednesday) & jobs market report (Thursday).