Australian dollar unable to hold on to US$0.67
Wednesday 22 March, 2023
Daily Currency UpdateThe Australian dollar is slightly stronger this morning when valued against the US dollar. The Australian dollar ended the session yesterday less than 1% lower to US$0.6660. NZDAUD shows a modest fall to $0.9275. The AUDUSD pair comes under heavy selling pressure on Tuesday and snaps a three-day winning streak to a nearly two-week high, around the US$0.6730 area touched the previous day. The pair maintains its offered tone through the first half of the European session and is currently placed around the US$0.6675-US$0.6670 region, down nearly 0.70% for the day. The Australian Dollar weakens a bit in reaction to the release of the dovish-sounding Reserve Bank of Australia (RBA) meeting minutes, which indicated that a pause in the rate-hiking cycle may be on the cards next month. The Australian central bank, however, warned that it will continue to do whatever is necessary to bring inflation back into line.
Looking ahead today and the Melbourne Institute will release the monthly Leading Index. This index is designed to predict the direction of the economy, but it tends to have a muted impact because most of the indicators used in the calculation are released previously. On Thursday we will see the release of the Conference Board Leading Index a combination of 7 economic indicators related to the 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 MoversAll eyes this week will remain glued to the outcome of the highly-anticipated two-day Federal Open Market Committee (FOMC) monetary policy meeting, scheduled to be announced on Wednesday. This will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move. The US Federal Reserve on Tuesday began its two-day deliberations with investors across the globe awaiting policymakers' decision on key interest rates in its aggressive fight against inflation amid an ongoing banking crisis. Another interest rate hike would risk exacerbating the banking crisis that began with the failure of the Silicon Valley Bank on March 10. Not raising it, as many Fed watchers and market experts are hoping, may lead to a resurgence in inflation sending wrong signals as well. Markets had previously expected the Fed to raise rates by 25 basis points in its March 21-22 FOMC meeting, but Powell’s earlier testimony to Congress sent market signals of a 50 basis points hike as the chief sounded hawkish. Expectations of a larger rate hike vanished after the news of the banking crisis erupted. At the previous meeting, the US Fed raised interest rates by a quarter percentage point, bringing the Fed funds rate to the 4.50%-4.75% range. Previously, the US Fed gave four consecutive 75 basis points rate hikes and then a 50 basis points increase in December, followed by a 0.25% hike in January.
- AUD/USD: 0.6600 - 0.6800 ▼
- AUD/EUR: 0.6100 - 0.6300 ▼
- GBP/AUD: 1.8200 - 1.8400 ▲
- AUD/NZD: 1.0650 - 1.0850 ▲
- AUD/CAD: 0.9050 - 0.9250 ▼