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AUD Hits YTD Lows as RBA Statement Opens Possibility of Pause

FOREX
  • The Reserve Bank of Australia hiked the policy rate by 25bps to 3.60% overnight, alongside expectatons. Markets took more interest in the accompanying policy statement, however, which raised the likelihood of a pause to the policy tightening cycle at the upcoming meetings. As a result, AUD trades markedly weaker, with the currency softer against all others in G10.
  • AUD/USD has plumbed fresh YTD lows in recent trade at 0.6674, with the pullback in prices accelerating on the break below last week's lows of 0.6695 and the Jan 3 low of 0.6688. This bearish break opens mid-Dec lows at 0.6629 for direction.
  • JPY is at the other end of the table, sitting firmer amid a general risk-off backdrop. Equities hold well below yesterday's highs, with European markets similarly lower. The US yield curve sits lower and modestly flatter, with 10y off 2.5bps, while 20y drops 3.5bps ahead of NY hours.
  • The USD has gained in tandem with the JPY, helping drag most major pairs off overnight highs. EUR/USD and GBP/USD have both ebbed lower through the European morning in price action to mimic profit-taking ahead of Powell's appearance later today.
  • Focus ahead turns to the appearance of Fed's Powell in front of the Senate as he presents his semi-annual testimony later today. He appears in front of the lawmakers at 1500GMT/1000ET, however a release of text is possible ahead of time. There are no notable data releases for the duration of the Tuesday session.
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