Home Daily Commentaries AUD upswing falters as geo-political tensions rise and hopes of end to Ukraine war fade

AUD upswing falters as geo-political tensions rise and hopes of end to Ukraine war fade

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Thursday 20 February, 2025

Daily Currency Update

The Australian dollar fell through trade on Wednesday as risk sentiment faltered amid fading hopes of an early end to the Ukrainian/Russian war. With little of note on the macroeconomic ticket, the AUD tracked with a narrow range through the domestic session, bouncing between US$0.6350 and US$0.6370. The AUD then slipped below US$0.6350 through overnight trade following a post on Truth social from President Trump. Trump’s tirade labelled Ukrainian President Zelenskiy a dictator and blamed Ukraine for the prolonged conflict. The comments shocked markets and the AUD slid to an intraday low of US$0.6339 before finding support. With risk sentiment primarily dampening demand for European currencies, the AUD was able to maintain gains won through last week and stave off a deeper downward correction. With the other majors on the back foot, the AUD enjoyed strong gains against key crosses, pushing toward US$0.61 against the euro while eyeing a break above US$0.5050 against the GBP.

Our attentions today turn to January employment data. After this week's RBA policy meeting and the importance of data performance in shaping forward guidance, we are keenly attuned to any softening in labour market conditions.

Key Movers

The US dollar was broadly stronger through trade on Wednesday, advancing against most G10 currencies despite a modest fall in US treasury yields. With little of note by way of headline macroeconomic data, attentions were again affixed on President Trump as he offered further insight into his administration's tariff plans. Trump said he expects to impose a 25% tariff on cars, semiconductors and pharmaceutical imports, while at the same time souring hopes of an early end to the Russia/Ukraine war. Trump made comments about Ukrainian President Zelenskiy and about Ukraine of taking advantage of US Aid, insinuating they were to blame for the ongoing conflict. The comments posted on Truth Social prompted a correction across risk assets and a reversal across equities. The euro traded sharply lower, sliding below 1.0450 and toward 1.0400 before finding support and settling near 1.0420 ahead of open this morning.

In the UK, CPI inflation data printed above median estimates, finding a new 10-month-high. With both headline and core inflation accelerating, markets tempered their Bank of England rate cut expectations. There was little reaction across currency markets, with Trump's comments on Ukraine dominating attentions. Sterling fell on 0.15% on the day, sliding below 1.26, touching 1.20567 before finding support.

The yen was the day's best performer, buoyed by the decline in US yields following the FOMC meeting minutes for January and the decline in risk sentiment.

Our attentions turn now to US jobless clams and China's loan rates.

Expected Ranges

  • AUD/USD: 0.6250 - 0.6380 ▼
  • AUD/EUR: 0.6020 - 0.6120 ▲
  • GBP/AUD: 1.9750 - 2.0000 ▼
  • AUD/NZD: 1.1080 - 1.1150 ▼
  • AUD/CAD: 0.8980 - 0.9080 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.