AUD finds support as peace deal in reach
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Daily Currency Update
The Australian dollar edged higher through trade on Tuesday amid an improvement in risk sentiment. A joint statement issued by Ukraine and the US announced Ukraine is ready to sign a US proposal for a 30-day détente if concurrently signed by Russia. The announcement came at the same time as reports Washington had agreed to resume intelligence and security aid for Ukraine. A de-escalation of tensions between the US and Ukraine, coupled with an easing in the US-Canada trade tiff helped alleviate risk aversion and lift the AUD back above US$0.63. Having marked intraday highs at US$0.6309 the AUD slid back toward US$0.6290 leading into this morning’s open. Despite finding support against the USD the AUD continued its downward correction against the euro and pound. The euro moved higher following the Ukraine/Russia headline up 0.8%, forcing the AUD below 0.5750 before finding support, while tracking a similar path against the Pound, edging below 0.4850 before creeping back toward 0.4865.Our attentions today remain with geopolitical headlines as we seek more news on the Ukraine-Russia truce while US CPI data and a Bank of Canada policy update round out the macro ticket.
Key Movers
There is plenty to digest this morning after overnight headlines suggest a truce between Russia and Ukraine may be imminent, while trade tensions between the US and Canada tapered. The US dollar index moved lower as European currencies gained following reports that Ukraine was prepared to sign a US proposal of détente co-signed by Russia at the same time. While details of the 30-day truce are not yet known they are the first step to expanding negotiations for a broader peace agreement. The euro climbed 0.8% falling just short of a break above 1.0950, its highest level since October, while the Norwegian and Swedish kroners outperformed and the British pound pushed above 1.2950. In contrast, the Canadian dollar was the worst-performing major, falling as US-Canada trade tensions continued to simmer. President Trump threatened to double the steel and aluminum tax on Canada while substantially increasing tariffs on Canadian auto parts if Canada failed to drop its reciprocal tariff issued on US dairy goods and its 25% surcharge on electricity supplied to the States. As tensions spiralled Canada confirmed it would lift the surcharge on electricity if the US wound back threats to double steel and aluminum tariffs. The tempering of tensions helped the CAD climb off lows below US0.6890, recouping losses and trading back above US$0.6920 leading into this morning's opening.Our attention now turns to US CPI data and the Bank of Canada policy meeting. We expect the BOC will cut interest rates by 25 basis points.
Expected Ranges
- AUD/USD: 0.6250 - 0.6350 ▲
- AUD/EUR: 0.5720 - 0.5820 ▼
- GBP/AUD: 2.0450 - 2.0650 ▲
- AUD/NZD: 1.0980 - 1.1120 ▲
- AUD/CAD: 0.9020 - 0.9120 ▲