AUD/USD Scales To Near 0.6750 As Investors Cheer Signals Of Fed’s Policy-Tightening Pause

The AUD/USD pair reached 0.6750 in the early European session. The Aussie asset has been strengthened after the Federal Reserve (Fed) chair Jerome Powell delivered cues about pausing the rating-hiking spree after hiking rates by 25 basis points (bps) to 4.75%-5.00%. The street expects that Fed Powell has considered a pause amid fears of a banking debacle after three mid-size United States banks collapsed.

However, the Fed has not yet surrendered its weapons in front of stubborn inflation, as one more rate is still in the pipeline, and the central bank won’t look for any rate cuts this year.

S&P500 futures have stretched their recovery dramatically as investors shift their focus to rate-hiking pause signals from US banks’ expectations of tight credit conditions for advances. In his commentary about the condition of the US banking sector, Fed Powell claimed that US banks are strong and resilient. However, recent financial instability events could not rule out more filter execution from banks while disbursement of advances.

Tight credit conditions by US banks would lead to delays in advances to households and businesses, which could impact inflation, overall demand, and economic activities. Firms could witness a working capital crisis if advances get delayed and would get prone to an operating loss.

The US Dollar Index (DXY) is an inch far from the 102.00 cushions in the early European session. More downside in the USD Index cannot be ruled as an absence of assurance of blanket insurance for all deposits by US Treasury Secretary Janet Yellen has dented investors’ confidence in the US administration.

On the Australian Dollar front, investors are awaiting the release of preliminary S&P Global PMI (March) data. Per the consensus, Manufacturing PMI will contract to 50.3, and Service PMI will decline to 49.9.

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