Indices off highs
US indices eased back from record high levels in slow trading during the Asian morning today. The US Independence Day holiday took its toll on activity and liquidity as equities slid. US indices fell about 0.05% while the Japan225 index slid 0.23% and China shares slumped 0.5%.
The Australian dollar extended its current rebound into a second day, rising 0.06% versus the US dollar and 0.03% versus the Japanese yen. The slight risk-off sentiment pressured USD/JPY at the margin, with the FX pair sliding 0.07% amid some yen safe-haven buying.
AUD/USD is currently testing the 100-day moving average, which has capped prices on a closing basis since April 19.
AUD/USD Daily Chart
Australia retail sales miss
Retail sales in Australia rose 0.1% in May from a month earlier, rebounding from the -0.1% posted in April but falling short of economists’ expectations of a +0.2% print. The mediocre performance could justify the RBA’s second rate cut in a row earlier this week, though in a post-meeting speech on Tuesday he noted that monetary policy had a significant role to play in allowing the RBA to hit its inflation goal, but he called on the government to also do their bit by loosening its purse strings.
Hong Kong dollar surges
In the aftermath of Monday’s violent anti-government protests in Hong Kong, the Hong Kong dollar surged to the highest level versus the US dollar since May 2017 as tight liquidity in the banking system kept short-term rates elevated. Analysts have attributed the tighter liquidity to seasonal factors, as well as cash being tied up for both dividend payments and large initial public offerings.
Between February and May USD/HKD was regularly bumping against the upper threshold of its permitted trading band and has now fallen 0.8% from those levels. Reportedly the Hong Kong Monetary Authority spent HK$22.1 billion ($2.8 billion) in March to defend the currency’s peg at 7.85. The FX pair is now 0.44% above the lower band threshold at 7.75.
USD/HKD Monthly Chart
No fireworks on the data calendar
While the US will be enjoying fireworks on the fourth of July, we have only European events to focus on, and there aren’t many. Euro-zone retail sales for May is the only major release while we can also expect speeches from ECB’s Lane and De Guindos.
The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/ 
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