• AUD/USD is stuck in a sideways range at daily support.
• RBA FSR was released, unevenly and the focus remains on external risks.

AUD/USD is moving sideways over the weekend around 0.7480 and is stable in Friday’s Asian session. Despite a strong US Dollar, AUD/USD managed to overcome the pessimism in the US midday session, recovering from the floor and correcting from new daily lows.

US stock indices rebounded late in the day and mostly rose on Thursday as investors bought battered stocks. Helping to boost the S&P 500, Pfizer Inc (PFE) gained 4.3%’ after the pharmaceutical company announced it would buy privately held ReViral Ltd in a deal worth up to $525 million, its second acquisition in less than six months. Reuters reported.

Meanwhile, the US dollar hit its highest level in nearly two years and the US 10-year Treasury yield hit a three-year high on hawkish signals from the Federal Reserve. In Asia, the greenback extended these highs. DXY, hit a new cycle high of 99.903, the highest since late May 2020.

Supporting the greenback, the 2yr-10yr spread also widened due to the Fed’s plans to reduce its balance sheet. The 10-year Treasury yield was 3.8 basis points higher at 2.647% while the 2-year note yield was down 4.5 basis points at 2.457%, leaving the 2-10 gap at 18.72 basis points at the close of play on Wall Street.

Domestically, Australia’s trade surplus narrowed to AUD 7.5 billion in February, with the surplus hurt by a huge thump in imports (+12.1% month-on-month) due to rising oil prices and stronger demand. The blow, however, was mitigated by the second consecutive month of record exports.

On Friday, the Reserve Bank of Australia’s Financial Stability Review was released:

In the FSR, the RBA noted that “large borrowers are prepared for an increase in interest rates”.