AUDUSD faces challenges as complex reactions to the US banking

AUDUSD has under selling pressure at 0.6660 while the Dollar Index defends the 103.00 level.

After a steady rebound to about 0.6660 in the early European session. The AUDUSD has come under intense pressure. The Australian currency has felt significant offers as the US Dollar Index recovers (DXY). The AUDUSD  is expected to remain volatile. Ahead of the announcement of the monthly Consumer Price Index (CPI) on Wednesday.

S&P500 futures have surged in the early session on Monday. As investors anticipate an increase in liquidity support to tiny US banks. The 500-US stock futures basket has maintained its positive leaning from Friday. Indicating a considerable increase in market participants’ risk appetite.

The US Dollar Index (DXY) is defending the 103.00 level amid expectations. That the upbeat preliminary S&P Global PMI will fade. Anticipation that the Federal Reserve will end its rate-hiking cycle (Fed). Manufacturing PMI increased to 49.3, above the consensus of 47.0 and the previous data of 47.3. While the Services PMI increased to 53.8 from 50.5 expected and 50.6 previously released.

Also, demand for US government bonds has weakened slightly. Resulting in a tiny rebound in 10-year US Treasury rates above 3.38%. Meanwhile, two-year US Treasury rates, which closely track US stocks, have risen over 3.38%, signaling that risk-sensitive assets may face further pressure.

The market is divided on Federal Reserve Chair Jerome Powell’s comments about fewer rate rises ahead.

The street is filled with fear about the United States’ economic prospects following the turbulence in the financial industry. The failure of three mid-sized American banks was enough to shake investor confidence. Concerns of a banking meltdown have spread to people, who have drastically reduced their accounts with tiny American banks.

According to Reuters, records from the Federal Reserve (Fed) reveal that deposits at small U.S. banks decreased by a record amount following the failure of Silicon Valley Bank (SVB). As a result, US authorities have stepped in to broaden the support blanket for US mid-sized banks by expanding the emergency liquidity facility. This has brought some temporary relief, but the situation is expected to deteriorate further.

During his speech at the During the weekend at the China Development Forum, International Monetary Fund (IMF) Head Kristalina Georgieva warned that “risks to financial stability have intensified.” She went on to say that 2023 will be another difficult year, with global economy dropping to 2.9% due to the pandemic, the Ukrainian crisis, and monetary tightening.

American banks’ cautious steps in making loans to families and companies have increased the possibility of a US recession. “Current stress in the banking industry and the likelihood of a follow-on credit crisis moves the US closer to recession,” Minneapolis Fed president Neel Kashkari said on Sunday. That definitely brings us closer together.” It would be a difficult decision for the Fed to raise interest rates if recession worries are there.

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