AUD Extends Losses ahead of tomorrow's RBA Meeting

AUD

The AUD plummeted to fresh lows on Friday, with the commodity-backed currency printing fresh yearly lows across most major currency pairs. Asian Equities were mixed on the Friday close with both the CSI and Shanghai Comp down -1%, while the Nikkei was up 2.1%. The ASX closed off a wild week with gains as investors pushed Australia’s share market out of correction territory. The ASX200 closed 2.2% higher on Friday, up 149.8 points. Commodities were down across the board with Silver, Gold and Iron Ore all closing heavily in the red. With little in the way of data locally for the AUD, investors are keenly anticipating the RBA board as they meet tomorrow, Governor Lowe will speak the following day, before the quarterly Statement on Monetary Policy is published on Friday. Will the RBA be forced to lean into rate hikes this year following the recent good employment and inflation data?

USD

The AUDUSD continued its recent downfall and dived to the lowest level since July 2020 on Friday, with the pair trading at a rate of 0.6985 at the time of writing. US Equities regained the week’s losses on Friday with Nasdaq posting its biggest gain in over 7 months, the S&P500 finished closely behind up 2.4% and the Dow Jones was up 1.7%. The yield on 10-year US Treasuries advanced 4bp to 1.84% and Oil headed for the weekly advance with WTI up 0.6% to $87.11 a barrel. In early data, US Q1 Employment Cost Index rose by 1.0%, down from 1.3% and below expectations of 1.2%. December Personal Income rose by 0.3% to fall short of expectations of 0.5% with Personal Spending at -0.6% as expected. Looking forward, there is a lack of higher tier data out of the US with the Michigan Consumer Sentiment and Personal Consumption Expenditure being the only data of note.

EUR

The AUDEUR extended its losses and trade two-month lows at 0.6254, before coming back to trade at a rate of 0.6260 at the time of writing. European Equities fell recently on a bearish cocktail of mainly geopolitical tensions over Ukraine and doubts about the strength of the economic recovery in the Eurozone, the DAX fell sharply down -1.3% while the CAC closed -0.8%. In the event on Friday, The French economy has posted its strongest growth in over 50 years, with GDP YoY 5.4% (4.9% expected). Spanish GDP grew by 2% q/q beating expectations of 1.4%. Germany’s economy contracted 0.7% in Q4, missing expectations of -0.3%. The Eurozone economic sentiment has deteriorated with the monthly economic confidence index down to 112.7 from 115.3 previously. To the data this evening, there’s a flurry of European Data on the docket with the Eurozone Flash CPI & GDP being the key focus.

GBP

The AUDGBP followed suit to extend the bearish AUD momentum, trading as low as 0.5204 before trading at a rate of 0.5215 this morning. British stocks weakened on the Friday close amid fears of interest rate rises and the ongoing geopolitical drama, the blue-chip FTSE 100 fell 1.2% to 7,466 points. Geopolitical Tensions are still on the rise in the Eurozone as the UK prepares to sanction Russian Oligarchs. Foreign Secretary Liz Truss said on Sunday she would set out legislations that would give Moscow notice of a ‘severe economic cost’ for any incursion into Ukraine – this comes after UK PM Boris Johnson responded to the Ukraine Crisis by offering NATO a further 900 troops for deployment to Estonia. There is no key macro data over the next 24 hours, with a busier day for markets expected on Wednesday morning.

NZD

The AUDNZD seesawed in the late trade on Friday and sits marginally lower, trading at a rate of 1.0669 at the time of writing. In the absence of local data across the ditch, investors will focus on Australia this week as the RBA meets tomorrow before the quarterly Statement on Monetary Policy is published on Friday – the first RBA meeting for 2022.