USD Supported, AUD & NZD Down On Lower Equities & Commodities

The supportive USD tone has persisted through today's session. The BBDXY index is up only modestly, near +0.05% at this stage, putting the index above 1225.60. However, USD outperformance against higher beta FX has been more noticeably, with AUD and NZD both off by around 0.40% at this stage.

• The better than expected services China PMI did little to lift sentiment, with risk-off flows evident in the equity space for China and HK markets. This looks to be profit taking flows ahead of month end, with one eye also potentially on tomorrow's Fed meeting.
• AUD/USD sits at 0.7030/35 currently, off 0.40% and unwinding all of the post CPI rally we saw from Wednesday last week. The much weaker than expected Dec retail sales print weighed, with AU yields underperforming the firmer core tone. The AU-US 2yr spread is back at -112bps, versus recent highs closer to -102bps. Weaker commodity prices are also weighing, with copper and iron ore off recent highs.
• NZD/USD sits back at 0.6440/45, also around 0.40% off for the session.
• Yen has seen some outperformance, with USD/JPY close to unchanged for the session, last around 130.30/35. Japan data was mixed, while headlines from the Finance Minister didn't shift the needle from a BoJ standpoint.
• Looking ahead, preliminary euro area Q4 GDP is out and in the US Q4 employment cost index, Chicago PMI and November house prices.