The Week Ahead – Uneasy calm
AUDUSD slips as RBA to pause tightening
The Australian dollar drifts lower as a slowdown in consumption supports the case for a rate pause. Data show that households are feeling the pinch of tighter monetary policy with February’s retail sales falling well short of expectations. As the full impact of higher interest rates is set to come into effect over the next few months, further moderation in consumer spending is expected. That would allow the RBA to justify a pause in rate hikes. Uncertainty in the global financial system could be another factor that may prompt the central bank to stay put at its April meeting. 0.6770 is a fresh resistance and 0.6500 the closest support.
NZDUSD goes sideways ahead of RBNZ meeting
The New Zealand dollar consolidates ahead of the RBNZ policy outlook. Short term inflation expectations remain above 5.5% and high by the RBNZ standard. With inflation near a three-decade high and way above the target 2%, it will take time for restrictive interest rates to work their magic through the system. The question is whether policymakers have enough patience to sit through. Now consumer price data will need to show concrete evidence of a downtrend, otherwise, the central bank would need to do more according to the bank’s chief economist. The pair has found bids over 0.6090 and 0.6370 is the first hurdle.
XAUUSD rallies as traders hedge uncertainty
Bullion rallies as investors pour into safe bets in times of uncertainty. In spite of historical returns on cash with rising global interest rates, the zero-yield metal is on course for a new all-time high. The surge in safe haven demand means that gold is the ultimate gauge of wariness in the market. After the recent banking turbulence, nobody knows what is brewing behind the scene, and what else higher borrowing costs might break. ‘Better be safe than sorry’ seems to be the motto market players live by and the precious metal may continue to enjoy its ride. The price is heading towards March 2022’s high of 2070 with 1920 as support.
SPX 500 recovers as turmoil eases
The S&P 500 claws back losses as investors start to regain some confidence. Market sentiment saw further signs of stabilisation after First Citizens BancShares scooped up the deposits and loans of Silicon Valley Bank, preventing a bank run and potential contagion across the industry. Swift interventions from the Fed and Treasury are a reminder that authorities remain a lender of last resort, instilling a sense of business-as-usual into the market as volatility seems to have returned to its normal range. Convalescent financial stocks and risk appetite may help the index recover lost ground. 3800 is a solid support and 4180 a key resistance.