Big Week Of Central Bank Meetings Ahead
AUD
The Aussie dollar finished last week with losses across the board as the toll from the Russia/Ukraine scenario continues to escalate. There were rays of hope of a diplomatic solution throughout the week, but for now these have just been words. Moscow’s attacks on Ukrainian cities have continued unabated, Ukrainian foreign minister Kuleba talked down Putin’s earlier positive comments about diplomatic progress, saying there was zero progress on talks with Russia on Thursday and that Ukraine’s neutrality must come with security guarantees. Asian equities finished an eventful week with the majority of the major bourses losing ground. The ASX gave up 0.9% with the Nikkei losing over 2% after outperforming on Thursday. A relatively quiet day on Friday for commodities with gold, silver, iron, and copper losing out 0.8%, 0.6%, 0.1%, and 0.6% respectively. Australian economic data continued showing signs of improvement coupled with rising inflation. March Consumer Inflation Expectations unexpectedly jumped to 4.9% from 4.6% in the previous month. Looking to the week ahead, tomorrow the RBA will release the Minutes of last week's monetary policy meeting this week, while publishing February employment figures on Thursday morning which will be the major data piece for the week.
USD
The AUDUSD pair finished the week with modest losses, surrendering the 0.7300 threshold and opening this morning at 0.7287. Over the weekend the White House announced that the US was revoking Russia’s most-favoured nation trading status and was banning imports of Russia’s seafood, alcohol, and diamonds. President Biden also urged US allies to suspend normal trade with Russia. Wall St remained soft into the weekend with the NASDAQ -2.2%, the S&P 500 -1.3% and Dow Jones -0.7%. The volatility in energy prices continued and crude oil closed +3.1% at $109.30 a barrel while U.S yields finished unchanged. Looking to the week ahead, and The Fed is tipped to raise interest rates on Thursday morning this week. In stark contrast to our own Reserve Bank of Australia which insists on a wait-and-see stance, the market has rushed to price in a 50 bps rate hike coming from the US Federal Reserve this week. Partially responsible for this bullishness, the US Consumer Price Index for February surged to 7.9% YoY, its highest in four decades. The US central bank could still raise rates by just 25 bps, something that will likely spur some optimism among stocks traders and negatively impact the greenback. In addition to US interest rates, a packed week in the way of US data this week, starting tomorrow night with PPI m/m.
EUR
The AUD traded sideways against EUR, opening this morning slightly down at 0.6668. Into the weekend, the DAX and CAC both performed surprisingly well to close up the week, gaining 1.4% and 0.9% respectively as a result of positive rhetoric from Putin. The Euro zone is under pressure from rising inflation due to commodity supply constraints (of which monetary policy cannot rectify) as well as its reliance on Russia/Ukraine. Russian shelling of Ukraine has continued throughout the week, human corridors have been scarce, and those opened by Moscow lead to Russia or Belarus. International sanctions increased, with the US banning imports of crude oil and energy-related products from Russia effective this week causing Europe to start rushing to find alternatives to gas. Looking ahead this week with data releases, ZEW Economic Sentiment, and ECB’s President Lagarde is due to speak on Thursday evening.
GBP
Much like with the Euro, AUD is opening lower here, trading this morning at 0.5587. The FTSE gaining 0.8% on Friday, much like its European equities counterparts, as a result of Putin’s questionably upbeat sentiment, saying there were “certain positive shifts” in talks with Ukraine, while Ukraine Foreign Minister says the opposite. UK’s GDP for January rose 0.8% higher than the 0.2% contraction in December. Furthermore, Industrial Production for January rose 0.7% m/m, influenced by the spike of 0.8% growth in manufacturing. The services sector increased by 0.8% higher than the -0.5% fall of December. In what is a big week ahead of Central Bank meetings, the Bank of England will see MPC Official Bank Rate Votes, Monetary Policy Summary, and the Official Bank Rate being released on Thursday evening, after the US Fed's equivalent meeting early Thursday morning.
NZD
The AUD gained ground against its antipodean cousin on Friday, opening this morning at 1.0709. On Friday, the New Zealand macroeconomic docket featured the Business Performance of Manufacturing Index, which rose to 53.6 in February. BNZ Senior Economist, Craig Ebert mentioned “Underlying unease will certainly be piqued by the sustained high COVID case numbers as we go into March. The next PMI result may also see fallout from the Russia/Ukraine conflict, whose global impacts will be felt far and wide”. The major data from across the ditch will arrive on Thursday with GDP results from Q4 last year.