Home » Daily Commentaries » Risk off tone drives modest end to rollercoaster Q1

Risk off tone drives modest end to rollercoaster Q1

Friday 1 April, 2022

Daily Currency Update

A risk off tone prompted a somewhat modest close to what has been a blockbuster Q1. Volatility across financial markets has been elevated ever since the outbreak of war between Ukraine and Russia as a surge in commodity prices and fluctuations across global bond rates drive direction. The AUD slipped below 0.75 US cents on Thursday after softer than anticipated Chinese PMI data fostered a pessimistic risk off tone that permeated markets throughout the full trading day. Both manufacturing and non-manufacturing gauges fell below 50, the linear point that dictates expansion or contraction. Tumbling past expectations to touch 48.4, COVID lockdowns appear to be having an even greater impact with figures for April expected to be even worse as restrictions tighten. Some 30% of China’s GDP output faces COVID protocols in some form or another and until this latest surge in infections dissipates or China abandons its COVID zero policy, the world’s second largest economy will continue underperforming. Having touched intraday lows at 0.7470, the AUD has found some support through the overnight session edging back toward 0.75 to buy 0.7487 at time of writing. Our attentions turn now to US non-farm payroll data and euro area inflation data for direction into the weekly close.

Key Movers

Safe haven currencies carried the day, buoyed by a risk off backdrop and fall in oil prices. Global rates tracked lower while equity markets were soft, as investors failed to kick a risk off mood that emerged on the heels of weaker than anticipated Chinese PMI data, while oil prices dropped following reports the US would release approximately 180 million barrels from its strategic reserve in an attempt to control supply shortages and ease further energy led inflationary pressures. The USD advanced across the board with the exception of the yen. Some sense of normality has returned to JPY trading, with the embattled unit recovering to force the dollar back below 122 to 121.50. Our attentions turn now to US non-farm payroll data and euro area inflation data for direction into the weekly close.

Expected Ranges

  • AUD/USD: 0.7420 - 0.7550 ▼
  • AUD/EUR: 0.6680 - 0.6820 ▲
  • GBP/AUD: 1.7450 - 1.7650 ▲
  • AUD/NZD: 1.0750 - 1.0850 ▲
  • AUD/CAD: 0.9320 - 0.9420 ▼