Home Daily Commentaries Commodity prices continue to drive AUD gains

Commodity prices continue to drive AUD gains

Daily Currency Update

The Australian dollar advanced through trade on Wednesday, buoyed by improved risk sentiment and a sustained surge in commodity prices. Risk appetite rebounded overnight despite an escalation in Russian attempts to take Ukraine. The Kremlin increased shelling on major cities overnight, bombarding Kyiv and Kharkiv while a massive military convoy snakes towards the capital. With the second round of talks set to take place shortly, there is a faint glimmer of hope tensions may ease; however, while Russia continues to push deeper into Ukraine, Ukrainian officials hold little hope of progress. In this environment commodity prices continued to surge higher, led by a 40% jump in European gas futures and a decade-high oil price. The uptick across key commodities and the improved risk appetite helped drive the AUD toward intraday highs above 0.73 US cents before resistance prompted a marginal correction into this morning’s open.

Attentions remain with developments in Ukraine and if commodities remain elevated the AUD should continue to find support toward the top end of recent ranges.

Key Movers

Moves across currency markets were again well contained when compared with price action seen across other financial assets. The Canadian dollar was the day’s top performer advancing near three-quarters of a percent following the Bank of Canada’s decision to raise interest rates by 25 basis points, joining the global monetary policy tightening cycle. With inflation reaching new highs and expected to drift higher still, policymakers confirmed a series of interest rate adjustments and a balance sheet review was appropriate. At the other end of the scale, the euro sunk to fresh 18-month lows touching supports at 1.1060 before edging back above 1.11 on a late surge in risk demand. With European gas futures continuing to rise and supply constraints already exacerbating inflation pressures there is a fear the war will tip Europe back into recession as the ECB battles low growth and excessive price pressures.

Fed Chair Jerome Powell seemingly rubber-stamped a rate hike later this month, suggesting a 50-point hike was not out of the question should inflation pressures remain elevated. Powell was however careful to highlight recent developments in Ukraine and a higher level of uncertainty that may require a “nimble” policy approach moving forward. Our attentions today remain with Russia and Ukraine with more Powell testimony and ECB meeting minutes offering background macro noise.

Expected Ranges

  • AUD/USD: 0.7170 - 0.7350 ▲
  • AUD/EUR: 0.6480 - 0.6620 ▲
  • GBP/AUD: 1.8220 - 1.8480 ▼
  • AUD/NZD: 1.0680 - 1.0780 ▲
  • AUD/CAD: 0.9180 - 0.9280 ▼