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Volatility across bond markets permeate currencies

Tuesday 29 March, 2022

Daily Currency Update

Despite little headline newsflow to start the week volatile price action saw the AUD test 0.7540 before slipping back below 0.75 US cents amid broad based US dollar strength. Direction derived from a broader repricing across global bond markets as investors revised their projections for future Fed interest rates, pricing in a series of 50 basis point rate hikes, while the Bank of Japan offered to buy 10 year bonds at 0.245%, affirming its commitment to keeping rates below the 0.25% ceiling and further widening the gap in monetary policy expectations. The AUD pushed through 94 to mark highs at 94.25 before settling lower and trading between 92.50 and 93. As markets looked to the USD the AUD faced a sustained sell off overnight, exacerbated by fears China’s persistent Covid 19 lockdowns will soon crimp demand. With almost 5% of China’s population in lockdown commodity prices tumbled through Monday with oil leading the decline giving up 120USD per barrel, marking daily lows at 113USD per barrel. Domestic retail sales data headlines the local macroeconomic ticket, yet we expect little market reaction as our attentions remain with broader bond market performance, commodity prices and peace talks between the Russia and Ukraine.

Key Movers

Volatility permeated currency markets through trade on Monday as investors drove USD gains and the Yen tumbled. Markets looked to reprice fed funds rate projections while the BoJ offered to buy back 10-year JGB’s at 0.245% affirming policy makers commitment to keeping rates low and driving the Yen downward. The Yen gave up 2.5% as the USD surged through 125 before markets stepped in. Having touched intraday lows below 1.0950 the Euro recovered overnight to remain steady on the day, trading back near 1.10 while the GBP failed to arrest and reverse its recent downturn, giving up 1.31 to mark lows at 1.3070. With little of note on today’s ticket we look to broader bond market performance, commodity prices and peace talks between the Russia and Ukraine for direction.

Expected Ranges

  • AUD/USD: 0.7380 - 0.7550 ▼
  • AUD/EUR: 0.6780 - 0.6920 ▼
  • GBP/AUD: 1.7350 - 1.7550 ▼
  • AUD/NZD: 1.0780 - 1.0920 ▲
  • AUD/CAD: 0.9350 - 0.9420 ▲