AUD/USD fails to capitalise on uptick in sentiment

Daily Currency Update

The Australian dollar edged marginally lower through trade on Monday, despite a broad uptick in the underlying risk narrative. Risk appetite was lifted as confidence in the US and European banking systems improved following key announcements from regulators. In a major step to restoring confidence, the FDIC announced First Citizens bank with substantial support from the FDIC, will buy out the remnants of Silicon Valley Bank, while First Republic Bank will have access to an expanded emergency lending facility, giving it more time to shore up its balance sheet. The promise to use tools to protect any sized institution and keep the banking system sound helped drive equities and risk assets higher. The AUD however failed to capitalise on the upturn in sentiment, slipping to intraday lows at US$0.6635. While sentiment improved, the renewed confidence in the banking system helped lift expectations for another 25-point Fed rate hike. While many had anticipated the FOMC would pause its hiking cycle in May, stability across the financial system has helped fuel bets for another rate adjustment. With front-end rates rising back toward 4%, the USD found support against most counterparties adding downward pressure on the AUD. Our attentions today turn to domestic retail sales data ahead of key commentary from Fed officials and US consumer confidence data. With markets still consumed by developments surrounding the health of US and European banking systems, we anticipate direction will remain choppy and the AUD will track between US$0.6580 and US$0.6720.

Key Movers

Despite ample activity across key equity indices, price action across major currencies was relatively muted through trade on Monday as competing forces worked to counter moves in either direction. Improved risk appetite on the heels of more regulatory support for the banking systems was offset by an uptick in Fed rate expectations. While the USD, euro, GBP, AUD, and NZD all maintained narrow trading handles, the yen underperformed and the CAD outperformed. Against a backdrop of higher global rates, the yen gave up three-quarters of a per cent, allowing the USD to push back through 131.50, touching highs of  131.65. Improved confidence in the banking systems helped bolster oil prices, prompting a 4% surge, and dragging the CAD upward against all counterparts. Our attention today remains affixed to developments surrounding the health of the US and European banking sectors, while the macroeconomic ticket is dominated by US trade and consumer confidence data.  

Expected Ranges

• AUD/USD: 0.6570 – 0.6720 ▼
• AUD/EUR: 0.6120 – 0.6220 ▼
• GBP/AUD: 1.8280 – 1.8580 ▲
• AUD/NZD: 1.0680 – 1.0820 ▲
• AUD/CAD: 0.9050 – 0.9150 ▼