AUD steadfast in face of war and broader market volatility
Daily Currency UpdateThe Australian dollar maintained a narrow handle through trade on Monday, standing strong in what was otherwise a volatile start to the week across financial markets. The specter of war between Ukraine and Russia and looming US monetary policy change pushed investors toward haven assets, driving global equities lower and safe haven treasuries higher. Having tracked sideways through the domestic session the AUD tested a break below 0.71 as markets responded to US intelligence suggesting a Russian invasion of Ukraine was imminent. Touching intraday lows at 0.7085 the AUD soon recovered after President Putin quickly eased fears, agreeing, on-air, to seek a diplomatic solution, confirming Russia is not preparing for war. Moving back above 0.71 the AUD then drifted between 0.7110 and 0.7140, firmly entrenched in a narrow trading range.
Our attentions turn now to RBA policy meeting minutes. While we expect few surprises, the market will be keenly attuned to any signal policymakers are softening their hard-lined and dovish approach to monetary policy normalisation.
Key MoversThe USD dollar outperformed most counterparts through trade on Monday, bolstered by a surge in US bond rates following uber hawkish commentary from key fed officials. St Louis fed President Bullard suggested the FOMC will need to raise rates by 100 basis points through the next 3 meetings if it is to properly curb inflation, pushing policymakers to front-load the removal of accommodative monetary policy. Such an aggressive approach would require the Fed to raise rates by 50 basis points next month and follow this with a further two 25 basis points hikes in May and June. Bullard’s comments were somewhat offset by commentary from Kansas City fed president George. George was much more measured in her approach, suggesting a systematic amendment to monetary policy was more appropriate so as not to spook markets and derail a post pandemic-recovery. The DXY dollar index extended back above 96 to mark intraday highs at 96.44 as the Euro, GBP, JPY and CAD all fell down some 0.2-0.4%. With little of note on today’s ticket, our attentions turn to Wednesday UK CPI inflation data and the US retail sales as key macroeconomic markets shaping monetary policy expectations.
- AUD/USD: 0.7070 - 0.7250 ▲
- AUD/EUR: 0.6250 - 0.6350 ▲
- GBP/AUD: 1.8850 - 1.9120 ▼
- AUD/NZD: 1.0680 - 1.0780 ▲
- AUD/CAD: 0.9020 - 0.9120 ▼