Receding Risk of European Conflict Helps AUD Higher

AUD

The Aussie Dollar is on the improve as risk leaves markets with a perceived de-escalation of the Russia/Ukraine scenario. Equities were also understandably performing better, the ASX rose by 1.1%, the Shanghai Comp up 0.6%, and the NIKKEI as the greatest performer of the session, up 2.2%. In Commodities Gold was up 0.1% while Iron ore suffered with a 3.0% decline in value. Yesterday's local data, whilst of second-tier importance, was still generally positive with the CB Leading Index m/m and MI Leading Index showing 0.3 and 0.1% positive sentiments respectively. Yesterday's Chinese data fell short of expectations, CPI y/y figures at 0.9% less than predicted 1.0% and previous 1.5%. Along with the PPI y/y also slightly worse at 9.1% against forecasted 9.5% and previous 10.3%. The big-ticket item of today will be the the local Employment Change numbers and Unemployment Rate set to be released at 11:30am. The market has little to no change priced in, which may see positive movement for the Australian Dollar as this would insinuate positive employment figures of 4.2% seen in December persist. Yet some experts predict the January release could be messy given the reference weeks of 2-15 January which coincided with the surge of Omicron and the related disruptions to the labour market. The consequences of which may have been reduced overall hours worked and a possible temporary decline from 4.2% to one closer to that of 4%.

USD

The Aussie Dollar finds itself on a steady climb against the Greenback, trading at 0.7195 at time of writing, having briefly dabbled above 0.72 early this morning. USD was on the backfoot despite positive data releases overnight; Core Retail Sales m/m performed better than expected at 3.3% against projected 1.0% and previous -2.8%. Retail Sales m/m also seeing positive growth at 3.8% against forecasted 2.1% and previous -2.5%. Import Prices m/m was up 2.0% against projected 1.3% and previous -0.4% and Industrial Production m/m was up by 1.4% against expected 0.4% and previous -0.1%. The improved sentiment obviously was the key driving factor for AUD's improvement in the last 24hours. Wall St pared early losses with all three indices trading back to flat late in the session, with DOW JONES and NASDAQ quite flat at 0.0%, while the S&P 500 fell slightly by 0.1%. The FOMC Meeting Minutes early this morning offered no reason to expect a delay in the expected interest rate hike in March. Looking ahead we will have the G20 meeting, unemployment claims and a number of FOMC members speaking later this week.

EUR

The Aussie Dollar continues its steady climb against the Euro finding itself at a fresh 2-week high, trading at 0.6321 at time of writing. Relatively quiet out of the Eurozone at the moment with only the Industrial Production m/m and the German 10-y Bond Auction released overnight, both reaping generally positive results. In Equities the EuroStoxx 50 is around 0.5% higher in choppy trade conditions and looking ahead today we will see the ECB Economic Bulletin, Italian Trade Balance neither of which are expected to impact the Euro market in any major way. Later in the week we will also observe the release of French Final CPI m/m, Europe’s Current Account data and the consumer confidence report.

GBP

The Aussie has also gained against the Pound, trading higher at 0.5293 at time of writing despite a number of positive data releases out of the UK. The release of the UK CPI y/y overnight was slightly up at 5.5% against projected 5.4% and previous 5.4%, Core CPI y/y fared quite similarly at 4.4% against projected 4.3% and previous 4.2%. PPI Input m/m data also slightly better at 0.9% against predictions of 1.0% and previous 0.1%, alongside positive PPI Output m/m at 1.2% with the expected 0.6% and previous 0.3%, finally RPI y/y also improved at 7.8% against expected 7.4% and previous 7.5%. In UK Equities  the FTSE came out slightly lower at -0.1%. Not much else to be seen looking ahead this week. With quiet conditions expected out of the UK if no major Russia-Ukraine news emerges in the next few days.

NZD

Relatively flat trading conditions against the NZD with the AUDNZD trading at 1.07696 at time of writing having teased the 1.08 mark overnight. Generally quiet from across the ditch with most major news concerning the region seems to be focused around Covid-related protests and possible future rate hikes. Looking ahead on Friday we are set to see the release of PPI Input q/q, PPI Output q/q data neither of which are expected to shift markets in any major way.