- The combination of factors is causing recent selling around the AUD/USD on Wednesday.
- Australia’s lower CPI confirms expectations the RBA will stay in its rate cycle.
- The company’s USD demand contributes to the intraday decline.
The AUD/USD pair did not suffer positive movement in the previous day and came under renewed selling pressure on Wednesday. The constant intraday decline continues in the first hours of the European session and the pair pulls to a new daily low, around the 0.6670 zone in the last hour.
The Australian dollar’s reaction to softer-expected Australian consumer growth data for February weakens, which underscores expectations that the Reserve Bank of Australia (RBA) will hold off on interest rates at its April meeting. In fact, the Australian Bureau of Statistics (ABS) reported that the headline CPI slowed from the previous month’s reading of 7.4% to an annualized 6.8%, or the eighth highest in February. In addition to this, the appearance of buying around the US dollar (USD) puts downward pressure on the AUD/USD pair.
A recent recovery in US Treasury yields, easing fears of a full-blown banking crisis, helped the USD break a two-day losing streak. That said, a less hawkish stance, coupled with a strong risk appetite environment, could safely limit dollar gains and support the AUD/USD pair. It should be noted that last week H indicated a pause in interest rate hikes. In addition, the acquisition of Silicon Valley Bank by First Citizens Bank & Trust Company helped reassure the stock market about contagion risk.
The above-mentioned basic mixed color provides some caution before aggressive aggressive positions around the AUD/USD pair and positions to move further lower. Data on pending home sales will be released on the economic agenda in the US. This, along with US bond yields and broader risk sentiment, could weigh on the USD and give the AUD/USD pair some momentum. However, attention will remain focused on the US’s final quarterly GDP, due for release on Thursday, and the core PCE price index, the preferred H gauge of growth, due for release on Friday.