AUSTRALIAN DOLLAR SHOWS SIGNS OF RECOVERY – 26 APRIL 2023

 

AUSTRALIAN INFLATION AND US DURABLE GOODS ORDERS DATA, AUD/USD HOLDS GROUND AT 0.6600.

  • The Australian dollar (AUD) has shown some signs of recovery after hitting a fresh five-month low of 0.6614. However, the downside remains favored as the US Dollar Index (DXY) continues to show strength and negative market sentiment persists.
  • Investors are worried about the interest rate guidance from the Federal Reserve (Fed), which has triggered a V-shaped recovery in the USD index from a weekly low of 101.20. The Fed is set to announce its monetary policy for May next week, with a 25 basis points (bps) interest rate hike expected. The street was earlier anticipating that the Fed would pause its quantitative tightening regime after this interest rate hike.
  • The S&P500 settled Tuesday’s session on a bearish note, despite upbeat earnings from Microsoft and Google. Banking jitters renewed after First Republic Bank reported a sharp decline in customers’ deposits, requiring it to raise funds for disbursing loans. These events have triggered a risk aversion theme in the overall market.
  • A further deceleration in Australian inflation will allow the Reserve Bank of Australia (RBA) to stick to its policy-tightening pause. The RBA has already decided to keep its policy rate unchanged at a record low of 0.10%. The RBA also hinted at continuing with its asset purchase program for longer than anticipated, as the employment data remains weak.

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