AUDUSD regained upward traction amid continued USD selling.
On Wednesday, the AUDUSD pair draws new buying and reverses a significant portion of the previous day’s retracement drop from around a two-week high. The pair maintains its intraday gains into the first half of the European day and is now trading towards the upper end of its daily range, around 0.6700.
Expectations for a dovish Fed and reduced worries of a financial catastrophe weigh on the dollar.
When investors look past the Reserve Bank of Australia’s (RBA) indication of a rate halt. The persistent selling bias surrounding the US Dollar (USD) proves to be a major element. That aids the AUDUSD pair in regaining upward impetus. It is worth noting that the minutes of the RBA meeting on March 7 indicated a shift in hawkishness. With policymakers only considering a 25-basis point increase. In light of the uncertain economic outlook. The Fed decided to reconsider the argument for a pause at its April meeting. However, the Fed is likely to temper its aggressive approach. Dragging the USD to a new multi-week low and acting as a tailwind for the major.
Indeed, markets have been pricing in a 25-basis point rate rise at the end of a two-day FOMC meeting later this Wednesday. Additionally, the recent failures of two mid-sized American banks, Silicon Valley Bank and Signature Bank, have stoked speculation that the Fed may lower rates in the second half of the year. As a result, investors will closely examine the accompanying monetary policy statement, new economic predictions, and Fed Chair Jerome Powell’s statements during the meeting. The AUDUSD pair will benefit from a post-meeting press conference for signals regarding the route of future rate hikes.
The aforementioned mixed underlying backdrop may deter traders from taking aggressive directional bets. Ahead of the big central bank event risk. Nonetheless, diminishing worries of a full-fledged financial crisis should put USD bulls. On the defensive and continue to support the risk-sensitive Australian dollar, at least for the time being.
