AUD rallies as FX markets ignore risk move

Daily Currency Update

The Aussie dollar rallied in trading on Wednesday, extending past resistance at 0.7150 to test 0.72 US cents. Financial markets remain jittery as new reports suggest tensions between Ukraine and Russia remain at a precarious tipping point. There is little evidence that Russia is withdrawing its border forces and in fact appears to be advancing its military build-up, according to the NATO secretary general. Russia has refuted these claims, affirming President Putin’s desire for a diplomatic solution. Volatility in financial markets remains intact as analysts and investors try to consolidate their position in the uncertainty. Stocks and bond yields tumbled on a shift in risk aversion, but the AUD managed to maintain the week’s bullish momentum as there was little spillover in the currency aversion move. risk. A broad decline in the USD allowed the AUD to score intraday highs above 0.72 at 0.7205. Our attentions now turn to local labor market data ahead of next week’s all-important wage price release. The strength in the labor market and an increase in wage pressures will add increasing pressure on the RBA to make a policy shift and could help push the AUD towards 0.7250/0.73.

Key Movers

Price action in major currencies moved against the general trend of risk aversion, with the USD DXY Index dropping 0.3%, while traditional risk currencies saw an uptick. sharp rise. The inflation theme continued with CPI data from the UK and Canada both surprisingly on the upside. Headline inflation in the UK has hit 5.5%, its highest level in 30 years, and next month’s figure is expected to be even higher as household energy costs and basic food prices continue to rise. ‘to augment. Canada’s CPI jumped on 5% firmer bets for a long string of rate hikes starting with a 25 basis point hike next month. The pound broke through 1.3550 to test 1.36 as the CAD eyed a break above 0.79. With markets now pricing in a broad monetary policy shift across major central banks, the momentum behind the USD appears to be waning. Long-term metrics suggest the currency is overvalued and with inflation in the US outpacing other major economies, there is concern that this will dampen growth as we enter the second, third and fourth quarters. Our attention turns today to the Fed’s latest FOMC. minutes of political meetings, with a particular focus on reducing the balance sheet.

Expected ranges

  • AUD/USD: 0.7070 – 0.7250 ▲
  • AUD/EUR: 0.6280 – 0.6350 ▲
  • GBP/USD: 1.8780 – 1.9050 ▼
  • AUD/NZD: 1.0720 – 1.0820 ▲
  • AUD/CAD: 0.9050 – 0.9180 ▲

Comments are closed.