The AUD/USD has declined from an almost two-week peak on Monday. The pair has some support from an intraday improvement in the perception of risk worldwide. Bets spark new USD selling on a less aggressive Fed, which helps to contain the downside. So, traders are anticipating the RBA minutes on Tuesday for short-term inspiration.
The AUD/USD pair fails to take advantage of its slight intraday gains and falls from a nearly two-week high reached earlier this Monday at the 0.6730 level. Nonetheless, spot prices can recover a few pips from the daily low and are now trading just below the round-figure 0.6700 level going into the North American session.
The risk-averse Australian dollar is partly supported by a strong recovery in US equities futures as new selling pressure on the US dollar emerges. A further decline in US Treasury bond rates puts downward pressure on the safe-haven Greenback and serves as a tailwind for the AUD/USD pair against a minor improvement in the global risk mood.
Investors were obliged to reduce their wagers on a more aggressive tightening of monetary policy by the US central bank due to the recent failure of two mid-sized American banks, Silicon Valley Bank and Signature Bank. The markets are already pricing in a higher likelihood of a lesser 25 bps lift-off at the eagerly awaited FOMC monetary policy meeting, commencing this Tuesday, which is continuing to push down US bond rates.
It is noteworthy that last week saw the greatest three-day decline in the rate-sensitive 2-year US government bond since Black Monday in October 1987. This limits the downside for the AUD/USD pair and keeps the USD bulls on guard. Yet, worries about the danger of contagion and the potential for a full-blown global financial catastrophe might stop any market euphoria.
Ahead of the publication of the Reserve Bank of Australia’s (RBA) monetary policy meeting minutes, scheduled for Tuesday during the Asian session, traders may also avoid making risky directional bets and instead stay on the sidelines. The FOMC decision on Wednesday, which will affect the USD and provide the AUD/USD pair with a new directional push, will come after this.