AUD edges lower as US yields rise
Tuesday 18 April, 2023
Daily Currency UpdateThe Australian dollar retreated through trade on Monday, sliding back toward US$0.67, as global rates rallied and US treasury yields dragged the US dollar higher. Fading concern for the US banking sector helped fuel gains across two and ten-year rates, extending Friday’s chunky moves as markets all but fully priced in a 25-point rate hike next month.
Earning’s data for key US banks, Charles Schwabb, M&T bank and NY Bank all reported in line with or ahead of market expectations, helping alleviate concerns the US banking crisis will act as a handbrake on the economy. With banks reporting strong returns, expectations the Fed will look to loosen monetary policy through H2 have begun to fade, weighing on AUD upside and capping gains.
While the AUD outperformed key major counterparts, eating into recent declines suffered against the euro, GBP and NZD's near-term outlook against the world’s base currency remains clouded. In the absence of any meaningful shift in market narrative and near-term rate expectations continuing to favour the USD, we anticipate the AUD will meet sustained selling pressure on moves approaching US$0.68.
Key MoversThe US dollar outperformed through trade on Monday, extending Friday’s chunky moves, carried higher on the heels of rising near-term US treasury yields. Global rates climbed as fears the US banking calamity would act as a handbrake to global economic growth faded.
Strong earnings data reported by several key banks at the centre of last month’s crisis helped alleviate concerns and drive up expectations for a full 25-point Fed rate hike next month while forcing markets to pare back expectations for a loosening of monetary policy through the second half of the year.
With the dollar index advancing near half a per cent the euro, GBP and yen are all lower as our attention turns to key China activity data, UK labour market data and US housing data for direction through trade on Tuesday.
- AUD/USD: 0.6620 - 0.6750 ▼
- AUD/EUR: 0.6080 - 0.6180 ▲
- GBP/AUD: 1.8280 - 1.8620 ▼
- AUD/NZD: 1.0780 - 1.0920 ▲
- AUD/CAD: 0.8920 - 0.9020 ▲