Home Daily Commentaries AUD edges upward after Swiss National Bank offers liquidity backstop

AUD edges upward after Swiss National Bank offers liquidity backstop

Daily Currency Update

The Australian dollar trended upward through trade on Thursday as market sentiment improved following reports Credit Suisse will access as much as 50 billion Swiss Franc as a liquidity backstop. Having slipped below US$0.66 on Wednesday the AUD climbed steadily pushing back through US$0.6650 to mark intraday highs at US$0.6665. Better than anticipated domestic employment data helped underpin the AUD and AU rates as the market sought to price future rate adjustments. The events of the last week have dramatically changed the monetary policy landscape with analysts now expecting just one more rate hike before entertaining the possibility of rate cuts. With financial markets still absorbing this last shock, price action will continue to be driven by offshore volatility. A sustained improvement in sentiment could help lift the AUD back through 0.67, although we anticipate markets will sideline major bets until after next week's Fed Policy meeting. With US rate expectations tempered, markets will be keenly attuned to the Fed’s response to this latest banking crisis.

Key Movers

Price action across currency markets was somewhat subdued when you consider the volatility enjoyed across other financial markets. The US dollar closed the day lower while the Euro, GBP and commodity currencies all gained, and the yen tracked lower on improved market sentiment. Reports the Swiss National Bank will afford Credit Suisse a 50 billion Swiss Franc backstop helped calm market fears, bolstering demand for risk assets and driving gains across key equity indices. With the Dollar giving up ground as haven currencies faltered, the euro pushed off lows near 1.0550 pushing through 1.06 after the ECB elected to lift rates by 50 basis points. While policy makers issued clear signals a 50-point adjustment was coming, some analysts expected recent market uncertainty could prompt policy makers to temper policy changes. With little guidance provided on future moves the market is now pricing in a 30 basis point hike next month.

With limited macroeconomic data on hand to drive direction our attentions remain affixed to the ongoing fallout from this latest banking crisis. Sustained improvements in risk sentiment should help ensure price action is well contained while another shock could spark a safe haven run leading into the weekly close.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6730 ▲
  • AUD/EUR: 0.6180 - 0.6320 ▲
  • GBP/AUD: 1.8080 - 1.8420 ▼
  • AUD/NZD: 1.0680 - 1.0820 ▲
  • AUD/CAD: 0.9080 - 0.9180 ▲