AUD/USD pushes back above US$0.67 as risk sentiment improves

Daily currency update

An absence of headline news and top-tier macroeconomic data allowed the AUD to claw its way back above US$0.67 through trade on Tuesday as tensions eased and markets calmed. When compared with the turmoil that has engulfed financial markets through the last fortnight volatility across key equity indices and currency corridors abated. A lift in oil prices helped fuel gains across energy stocks while tech stocks faltered. With the S&P 500 and Nasdaq trading in negative territory, the USD was broadly weaker allowing the AUD to capitalise on improved risk sentiment. Having edged above US$0.67 the AUD touched intraday highs at US$0.6710. Another light macroeconomic ticket sees monthly domestic CPI headline the agenda with annual price pressures expected to ease back toward 7.2%. In the absence of any inflation shock price action should remain dominated by the fallout from the US and European banking crisis and until markets are confident the risk of contagion has been well and truly contained the AUD could struggle to extend beyond resistance at US0.6730.

Key movers

While a sense of calm moved over financial markets through trade on Tuesday the USD moved broadly lower. An absence of headline new flow and no top-tier microdata updates allowed markets a moments pause from the volatility that has dominated direction since the collapse of Silicon Valley Bank just 2 weeks ago. With no further evidence of contagion or stress to the banking system markets pared bets the Fed will ease rates through H2, driving global rates higher and lifting 2-year treasury yields back through 4%. Despite higher yields, the USD moved lower as the risk backdrop improved. The euro climbed back toward US$1.0850 while the pound eyed a break above US$1.2340. With oil prices advancing again the CAD extended its advance while the yen clawed back some ground forcing the USD back below ¥131. With little of note on today’s macro agenda, our focus turns to US GDP data and unemployment claims Thursday ahead of the Core PCE index print (the Fed’s preferred inflation marker) Friday.

Expected ranges

• AUD/USD: 0.6620 – 0.6730 ▲

• AUD/EUR: 0.6120 – 0.6220 ▲

• GBP/AUD: 1.8320 – 1.8480 ▼

• AUD/NZD: 1.0680 – 1.0750 ▼

• AUD/CAD: 0.9050 – 0.9150 ▲