US banking fears return.

US consumer confidence retreated to a 9-month low of 101.3 for April from a revised 104.0 the previous month and below expectations of an unchanged reading for the month. There was a stronger reading for the current situation at 151.1 from 148.9, but this was more than offset by a sharp decline in the expectations component to 68.1 from 74.0.

Consumers were less confident over the longer-term labour-market outlook and the overall expectations component remained consistent with recession conditions.

The Philadelphia Fed non-manufacturing index dipped further to –22.8 for April from –12.8 previously. Employment and inflation indicators were mixed, although there was stronger upward pressure on wages, increasing potential stagflation concerns.

There were some further reservations surrounding the economy after the US data.

There were also fresh concerns surrounding the US banking sector with a particular focus on First Republic as a larger than expected decline in deposits triggered a slide in the share price of 50% to a record low.

The relatively weak US data and fresh concerns surrounding the banking sector triggered a fresh deterioration in risk appetite during the day amid contagion fears.

Equities came under pressure and US yields moved lower with fresh demand for Treasuries.

The dollar secured an element of defensive demand as equities came under pressure and the currency index posted a limited recovery. There were also significant losses for the Euro and Sterling as long positions were cut while the yen gained net support.

First-quarter Australian consumer prices increased 1.4% from 1.9% previously with the year-on-year inflation rate declining to 7.0% from 7.8% and marginally above expectations of 6.9%.

The underlying inflation rate declined to 6.6% from 6.9% and slightly below expectations of 6.7%.

The Riksbank will announce its latest policy decision on Wednesday. Consensus forecasts are for a further 50 basis-point rate hike to 3.50%.

The bank’s rhetoric on the exchange rate will be watched closely.

The Euro was unable to make any headway after Tuesday’s European open and posted steady losses as risk appetite deteriorated. The dollar also secured defensive support as equities posted losses. EUR/USD dipped back below 1.1000 with lows at 1.0970 before a slight recovery to 1.0980 on Wednesday.

The yen gained defensive support as equities lost ground and US yields declined. USD/JPY dipped to lows below 133.50 before settling just above this level.

The Swiss franc gained an element of defensive support as risk appetite dipped. EUR/CHF traded around 0.9780 with tentative USD/CHF gains to 0.8920.

Sterling was dominated by weaker global risk conditions. GBP/USD dipped to lows below 1.2400 before a recovery to 1.2425.

Commodity currencies came under pressure as risk appetite dipped and the dollar posted gains. AUD/USD slipped sharply to 0.6615. There was a further limited decline after the weaker than expected core inflation data with AUD/USD testing the 0.6600 level. USD/CAD also posted gains to highs close to 1.3650 before settling around 1.3635.