AUD/USD continues to trade below 66 US cents

Daily currency Update

The Australian dollar is slightly stronger this morning when valued against the Greenback. The Aussie dollar finished the week on a soft note closing at 0.6580 and this saw NZD/AUD back above 0.93. Last week the Australian Dollar fell as the Reserve Bank of Australia (RBA) and Federal Reserve went their separate ways on monetary policy and high beta risk assets met headwinds going into the weekend. The RBA raised interest rates for the 10th consecutive meeting, with rates now sitting 3.5 per cent above where they were when the rate rise cycle began. It’s worth noting that recently financial markets were pricing in a cash rate as high as 4.35 per cent. Ultimately, the peak level of the cash rate is a key piece of the puzzle that will decide the trajectory of everything from home prices to the broader economy. The AUD/USD pair is currently trading at 0.6590. Looking ahead this week and on Tuesday we will see the release of the Westpac Consumer Sentiment and National Australia Bank (NAB) Business Confidence. Both surveys are leading indicators of economic health. On Thursday all eyes will be on the unemployment rate decision by the Australian Bureau of Statistics. NAB is forecasting the unemployment rate to rise sharply to 4.7 per cent next year and 4.8 per cent in 2025 while Commonwealth Bank of Australia (CBA) economist Gareth Aird’s number crunching provides a similar outlook. “We expect the unemployment rate to be 4.3 per cent [later this year] compared with the RBA’s forecast of 3.8 per cent,” he said. The Australian unemployment rate is currently at 3.7 per cent.

Key movers

In the US Banking regulators in California have taken over and closed the troubled tech lender Silicon Valley Bank, the biggest US bank failure since the global financial crisis. The California Department of Financial Protection and Innovation closed the bank on Friday and appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver. Shares of the bank were halted on Friday after they tumbled 66 per cent in pre-market trading. Silicon Valley Bank is the first FDIC-insured bank to fail in more than two years, the last being Almena State Bank in October 2020. Silicon Valley Bank’s plight could lead to a loss of confidence, tougher US regulation, and investor scepticism about the financial health of smaller US banks that were seen as adequately capitalised after regulators forced them to hold more capital in the aftermath of the 2008 crisis. The collapse of Lehman Brothers in 2008 sparked a worldwide credit crunch that contributed to the global financial crisis. On the data front, the US’s hiring boom continued in February with nonfarm payrolls adding another 311,000 jobs and the unemployment rate remains close to its 50-year low at 3.6%. The U.S. unemployment rate climbed from 3.4% to 3.6%, surprising market consensus that expected the rate to remain the same. The number of unemployed rose to 5.9 million in February. The number was sharply lower than the revised 504,000 new jobs the labor department announced were added in January, following months of slowed job growth. But it was far higher than the 220,000 economists had been expecting and come as inflation has remained stubbornly high. The Federal Reserve has signaled it will continue to aggressively hike interest rates in its fight to cool the economy and bring down prices. So far the Fed’s sharp rate rises do not appear to have filtered through to the jobs market.

Expected ranges

• AUD/USD: 0.6500 – 0.6700 ▲
• AUD/EUR: 0.6100 – 0.6300 ▲
• GBP/AUD: 1.8100 – 1.8200 ▲
• AUD/NZD: 1.0600 – 1.0800 ▼
• AUD/CAD: 0.9000 – 0.9200 ▲