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AUD under pressure amid risk-off mood

Daily Currency Update

A risk-off mood engulfed markets through trade on Tuesday driving equities and risk assets lower and forcing the AUD back toward the lower end of recent ranges. With Australian and New Zealand markets closed in observance of ANZAC day our attentions turned offshore. Risk sentiment soured early with global equities falling through the Asian session. China’s CSI 300 index fell for a fifth consecutive day while Hong Kong’s Hang Seng index gave up nearly 2%. The AUD slid back below US$0.67 through the local session extending losses overnight. Disappointing earnings results across key European and US Banks ensured the risk-off tone permeated the overnight session as fears of a broader banking crisis resurfaced. With the USD firmer amid the risk-off backdrop the AUD slumped to session lows south of US$0.6620 before finding support.
Our attentions turn to Q1 CPI data. Today’s print will prove pivotal in shaping near-term RBA rate expectations. After robust labour market data earlier this month, stubbornly high inflation will almost force the RBA to resume hiking interest rates while an easing in price pressures affords policy makers time to assess the impacts of recent rate adjustments. We anticipate a contraction in the annual pace of inflation toward 6.5%, a print above this could help the AUD climb back through US$0.67 and push toward the top of recent ranges.

Key Movers

The US dollar firmed through trade on Tuesday amid a risk-off backdrop. The dollar index climbed 0.5%, while the euro slipped back below US$1.10 and the pound gave up £1.25. Global equities remained on the back foot through the day as disappointing earnings results from European banks UBS and Santander, compounded concerns surrounding US bank First Republic. First Republic released Q1 results and while markets had priced a poor performance, deposit outflows were even larger than anticipated. With no presentation or guidance offered with the results, markets assumed the worse driving equities and risk assets lower. With the VIX volatility index climbing the JPY outperformed, emboldened by the risk-off mood.
Our attentions turn now to German Consumer confidence and US durable goods orders ahead of key euro area GDP, US employment and inflation data and the Bank of Japan’s latest policy meeting.

Expected Ranges

  • AUD/USD: 0.6580 - 0.6750 ▼
  • AUD/EUR: 0.5980 - 0.6080 ▼
  • GBP/AUD: 1.8580 - 1.8920 ▲
  • AUD/NZD: 1.0750 - 1.0880 ▼
  • AUD/CAD: 0.8980 - 0.9080 ▼