- AUD/USD keeps pullback from two-week high, dribbles around daily low.
- PBOC cuts 5-year LPR by 15 bps, keeps 1-year LPR unchanged.
- DXY consolidates the biggest daily fall in 10 weeks amid fresh hopes of faster rate hikes.
- Mixed markets, China’s covid conditions test Aussie traders amid a lack of major data/events.
AUD/USD dribbles around intraday low as PBOC rate cut battles cautious optimism in the Asia-Pacific markets during early Friday. That said, the quote takes rounds to 0.7030-25 while paring the biggest daily gains in two weeks around a fortnight high.
The People’s Bank of China (PBOC) lowered the five-year Loan Prime Rate (LPR) by 15 basis points (bps) to 4.45% but kept the one-year LPR unchanged at 3.70% in its latest moves. The PBOC left 1-year Medium-Term Lending Facility (MLF) interest rate unchanged at 2.85% earlier in the week.
On the other hand, China reports a sustained fall in the covid numbers and the virus-led deaths while justifying the recently eased activity restrictions in Shanghai, as well as in Mainland. “China reports 193 new confirmed coronavirus cases in the mainland on May 19 vs 212 a day earlier,” said Reuters. The news also mentioned no new coronavirus deaths on May 19 versus 1 a day earlier.
It should be noted that the US Dollar Index (DXY) consolidates the biggest daily fall in 10 weeks around 103.00, up 0.06% by the press time. The reason for the greenback’s rebound could be linked to the recent Reuters poll and comments from the International Monetary Fund (IMF).
“The US Federal Reserve will lift interest rates higher by the end of this year than anticipated just a month ago, keeping alive already-significant risks of a recession,” said the latest Reuters poll of economists.
On the same line was IMF Deputy Managing Director Kenji Okamura who followed Managing Director Kristalina Georgieva’s signal for tighter monetary policy ahead. IMF’s Okamura said, “Asian economies must be mindful of spillover risks as a decade of unconventional easing policies by major central banks is withdrawn faster than expected.”
While portraying the mood, the US 10-year Treasury yields remain pressured at the three-week low, down 0.5 basis points (bps) near 2.85%, whereas the S&P 500 Futures rise 0.50% intraday to 3,915 at the latest.
Moving on, a light calendar and mixed concerns will keep the risk catalysts on the driver’s seat but the recently escalated rate-hike calls may exert downside pressure on the AUD/USD prices, due to its risk-barometer status.
Technical analysis
Unless crossing a confluence of 21-DMA and a seven-week-old resistance line, around 0.7050, the AUD/USD prices are likely to remain pressured towards January’s low near 0.6965.