Tonight's ECB Meeting to Dominate Immediate Currency Flows

AUD

The Australian dollar has had mixed results over the last 24 hours. There was no local data of note yesterday, however RBA Governor Lowe spoke early yesterday morning outlining that raising interest rates too soon risked jeopardizing the goal of full employment. Gov Lowe also outlined that the war in Ukraine and the sanctions against Russia have created a new supply shock that is pushing prices up, especially for commodities. This is certainly evident from what we are hearing from a large percentage of clients. This new supply shock will extend the period of inflation being above central banks' targets. China released its annual CPI & PPI figures yesterday, with CPI meeting expectations of 0.9% whereas PPI outperformed expectations of 8.5%, printing 8.8%. No meaningful FX moves after the release. Local equities performed well with the ASX closing up 1% as risk sentiment marginally improved. Asian equities however suffered with the Shanghai Comp closing down 1.1%. Commodities were also down across the board with Iron Ore & Copper closing down 2.8% & 2.2% respectively. Looking ahead the Melbourne Institute will release its Inflation Expectations later today and Gov Lowe will speak again tomorrow morning. Tonight's ECB meeting will be the show-stopper for the next 24 hours (see below).

USD

AUDUSD is trading near its overnight high this morning at 0.7320. There was little in the way of news from the US overnight save the JOLTS Job Opening figures which printed an encouraging 11.26M, beating expectations of 10.96M new openings. US Equities reacted positively with the Dow Jones & S&P 500 closing up 2.3% & 2.6% respectively. US Treasury yields also increased by a few points each to 1.67% & 1.94%. Looking ahead, the US will release its CPI figures for the month tonight with the markets expecting a figure of 0.8%. This US CPI February headline monthly measure may show a further solid rise due to the boost from energy prices that occurred during the month. CPI data will be accompanied by monthly unemployment claims and rounded off with Federal Budget Balance figures. No doubt however that the ongoing conflict in Ukraine and increased sanctions will provide markets ample reason to move.

EUR

AUDEUR is trading near its overnight low at 0.6612 this morning, with the EUR having steadily clawed back some of its Ukraine-related losses since Monday. There was no significant data released aside from monthly Italian Industrial production figures which fell short of expectations of -0.6%, printing -3.4%. European equities however performed well with the DAX & CAC closing up 7.9% & 7.1% respectively. Later in the afternoon the Russian foreign ministry said its operational aim does not include overthrowing Ukraine’s government, and that it would prefer its goals to be met through continued talks. An aid to Zelenskiy indicated Ukraine is ready for a diplomatic solution and will discuss neutrality, while adding it won’t trade a single inch of territories. Ukraine’s government has also banned the export of wheat, oats and other staples as authorities try to ensure they can feed people during Russia’s intensifying war. Russia and Ukraine together supply 1/3 of the world’s wheat and barley exports. Tonight we will have a very interesting ECB Meeting and Press Conference, unique in the sense that there is a war underway which involves the major military Superpower of Europe. One would expect the ECB to adopt a accommodative approach, leaving as many options on the table as possible. Whilst rates are certain to remain unchanged, any step backwards from reduction in asset purchasing programme will hurt EUR.  Potential for volatility at 12.30am when the Press Conference begins.

GBP

AUDGBP is opening flat at 0.5552 this morning after peaking out at 0.5580 overnight. There was no news of note coming out of the UK overnight. UK Equities mirrored their European counterparts with the FTSE closing up 3.3%. Looking ahead there is no significant data being released save the RICS House Price Balance which is a leading indicator of housing inflation in the UK. The lack of data may result in other factors such as the ECB Meeting and updates in the war in Ukraine to be a driving force for the pair.

NZD

AUDNZD opened slightly higher this morning at 1.0701. There was no news of note coming out of New Zealand. However, looking ahead, the BusinessNZ Manufacturing Index will be released tomorrow morning which will be followed by monthly FPI figures which outline the change in the price of food and food services purchased by households.