Daily currency update

The Australian dollar is slightly stronger this morning when valued against the Greenback.  The Australian dollar jumped to an overnight high of 0.6758, after the Federal Reserve decision. It is testing the critical resistance zone around 0.6760, amid the broad-based Dollar’s weakness. Yesterday, investors looked past the Reserve Bank of Australia’s (RBA) hint of a rate pause as the prevalent selling bias around the US Dollar (USD) turns out to be a key factor that assists the AUD/USD pair to regain positive traction. It is worth recalling that the minutes of the RBA meeting held on March 7 revealed a step down in hawkishness as policymakers only considered a 25 bps hike and agreed to revisit the case for a pause at the April meeting amid the uncertain economic outlook. Looking ahead today and we will see the release of the Conference Board Leading Index a combination of 7 economic indicators related to money supply, building approvals, profits, exports, inventories, and interest rate spreads. Finally, on Friday we will see the release of the Purchasing Managers’ Index (PMI), a survey of about 400 purchasing managers, which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Key movers

The Federal Reserve (Fed) raised its key interest rate by 25 bps, as expected, to 4.75%-5.00%. The vote was unanimous. The Fed warned that inflation remains elevated while at the same time dropping the forward guidance toward further rate hikes. The Central Bank said it was too soon to assess the impact of the banking crisis on the economy. The greenback tumbled, together with US yields. The US 10-year fell to 3.50% before bouncing to 3.53% while the 2-year reached momentarily levels under 4.00%. Wall Street indices reacted to the upside; however, they have retreated a bit during the last minutes. The Pound Sterling retreated more than 70 pips from the six-week high it reached earlier of 1.2297 and dropped to 1.2218 as Pound’s momentum following UK CPI faded, ahead of the Federal Reserve’s decision. Earlier on Wednesday, the UK inflation numbers surprised to the upside. The Consumer Price Index rose from 10.1% to 10.4% YoY, against expectations of a modest decline. The unexpected accelerations boosted the Pound, that then gave back all gains. The inflation numbers increased the pressure on the Bank of England, which will announce on Thursday its decision on monetary policy. A 25 bps rate hike is now more firmly expected.

Expected ranges

  • AUD/USD: 0.6600 – 0.6800 ▲
  • AUD/EUR: 0.6050 – 0.6250 ▲
  • GBP/AUD: 1.8250 – 1.8450 ▼
  • AUD/NZD: 1.0650 – 1.0850 ▼
  • AUD/CAD: 0.9050 – 0.9250 ▲

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