AUD Starts the Week on a Strong Footing

AUD

The Aussie Dollar has managed to hold on to its trading highs against most of its major peers backed by strong Commodities, positive risk appetite and the promise of RBA interest rate hikes on the horizon. Record AUD shorts carried over from 2021 are also in the process of being unwound, offering a lifeline to the AUD. In Equities the ASX rose by 0.3%, while the Shanghai Comp fell -1.2% most likely in response to dovish sentiments in the Chinese market as Covid lockdowns in Hong Kong and Shenzhen has further exacerbated  manufacturing and logistics issues. Commodities remain strong as the Ukraine/Russia conflict continues to generate supply fears ,Gold fell -0.3% and Iron Ore rose 0.6% supported by increased market demand. Not much in the form of local market data over the last couple days, a trend that looks to continue throughout the week with no major local data releases expected over the next few days. Risk an commodity prices will likely dictate the fortunes of AUD in the coming week.

USD

On Friday the AUD achieved its highest level since November '21 of 0.7537 against the Big Dollar, currently trading slightly lower at 0.7511. Despite the Ukraine/Russia war and an interest rate disadvantage, the AUD has recently outperformed most expectations thanks to rising commodity prices. The strong AUD will likely be put to the test  US Federal Reserve Chairman Jerome Powell becoming more aggressive on monetary policy by hinting he will favour a 50 bps rate hike in the upcoming May meeting. He also explained that they would likely complete plans for a balance sheet reduction by the time of the next decision. Powell's view was also supported by Fed Member Williams stating that “If it’s appropriate to raise rates by 50Bps I will do that”.  In US Equities the Dow Jones was up 0.4%, the S&P 500 up 0.5% and the NASDAQ lagging a little behind, down -0.2%. While in Commodities Crude Oil up 1.4% after a missile attack on a Saudi Aramco oil refinery over the weekend. Looking ahead and after what will be a slow start to the week, the USD data kicks off tomorrow night with JOLTS Job Openings before the official US employment report is released on Friday night. 

EUR

The Aussie Dollar continues a steady rise against the Euro trading at 0.6839 at time of writing, which is only just below fresh 5 year highs. Last Friday night we observed the German ifo Business Climate release fall short of its 94.2 expectations coming in at 90.8 against previous 98.5, along with M3 Money Supply y/y, Private Loans y/y both coming in at predicted levels; 6.3% and 4.4% respectively. In Equities the DAX was slightly up 0.2%. Much of European news is still very much so dominated by the unfolding Russia-Ukrainian Crisis on its eastern border but in terms of FX news, not much in the form of data out of the Eurozone today and only the German Consumer Climate and Import Prices m/m set for Tuesday, although the back on the week will see a slew of smaller market releases that may be worth keeping on eye on.

GBP

The AUDGBP pair has seen the Aussie hold its 15-month high against the sterling currently trading at 0.5703. Little in the way of data was released from the UK on Friday and the FTSE followed other bourses with marginal 0.2% gains. The Bank of England’s Bailey will speak tonight and his fellow MPC member Broadbent speaks Wednesday, sharing their latest views on the outlook for policy settings. The next policy decision is not until May 5th though  still a long way off, which ordinarily would mean limited scope for a major reaction. However, the OIS rate has just 31bps of further tightening priced in for that meeting, so any suggestion from Gov Bailey (in particular) that a 50bps hike is on the table should give sterling a strong boost.

NZD

The Aussie is trading quite steadily at 1.0806 against its little cousin across the ditch at time of writing, both currencies riding the wave of support seen within the commodity market. In NZ market data not much to see as usual, yet we will be receiving both the Building Consents m/m, ANZ Business Confidence releases on Wednesday.