AUD/USD: Mildly bid around mid-0.6600s amid cautious optimism, Australia/US inflation in focus

AUD/USD picks up bids to pare weekly losses amid sluggish markets.
News of a deal for Silicon Valley Bank joins dovish comments from Fed’s Kashkari to lure Aussie pair buyers.
Absence of data/events on Monday allow pair to consolidate previous fall ahead of the key inflation numbers scheduled during the week.

AUD/USD grinds near an intraday high surrounding 0.6650 amid Monday’s sluggish Asian session, portraying a mildly positive sentiment after a week of pessimism and volatility. In doing so, the Aussie pair cheers hopes of easing banking fears while also cheering news suggesting the challenges for the Federal Reserve’s (Fed) rate hikes.

That said, comments from Minneapolis Fed President Neel Kashkari on the CBS show Face the Nation seem to weigh on the US Dollar of late as the policymaker said, that recent stress in the banking sector and the possibility of a follow-on credit crunch brings the US closer to recession.

Previously, Atlanta Fed President Raphael Bostic told NPR that it was not an easy decision to raise the policy rate while also adding that he is not expecting the economy to fall into recession. “Fed has to get inflation under control,” said Fed’s Bostic. Further, St. Louis Federal Reserve President James Bullard, a policy hawk, said on Friday that the response to the bank stress was swift and appropriate, allowing the monetary policy to focus on inflation, per Reuters. The policymaker also added that the projections suggest one more rate hike that could be at the next FOMC meeting or soon after.

It’s worth noting that the headlines from Bloomberg also contributed to the risk-on mood and allowed the AUD/USD price to remain firmer after a loss-making week. “First Citizens BancShares Inc. is in advanced talks to acquire Silicon Valley Bank after its collapse earlier this month, according to people familiar with the matter,” said Bloomberg.

Talking about the data, US Durable Goods Orders for February dropped by 1.0% versus January’s fall of 5% (revised from -4.5%) and the market expectation for an increase of 0.6%. Details suggested that the figure for Durable Goods Orders ex Defense and ex Transportation were also downbeat but Nondefense Capital Goods Orders ex Aircraft came in firmer-than-expected 0.0% to 0.2%, versus 0.3% prior. Moving on, the preliminary readings of the US S&P Global PMIs for March came in firmer as the Manufacturing gauge rose to 49.3 from 47.3 in February, versus 47.0 expected, while Services PMI rose to 53.8 from 50.6 prior and 50.5 expected. With this, the S&P Global’s Composite PMI increased to 53.3 from 50.1 in February, versus 50.1 market forecasts.

Amid these plays, S&P 500 Futures trace Wall Street’s mild closing while the US Treasury bond yields remain pressured.

Moving on, AUD/USD traders may witness further consolidation on Monday amid a lack of major data/events. However, the cautious mood ahead of this week’s Aussie Retail Sales, monthly inflation and the Fed’s preferred inflation gauge, namely the Core Personals Consumption Expenditure (PCE) Price Index, could test the pair’s upside momentum. It’s worth noting that the Reserve Bank of Australia officials have mostly been cautious of late and hence softening the inflation signals could keep the sellers in the driver’s seat.