AUD Firm as Ukraine Peace Talks Develop
AUD
AUD remains relatively firm (except against EUR) as market sentiment improves on the prospect of more serious peace talks between Ukraine and Russia. Markets seem happy to focus on Eastern Europe at the moment without paying as much attention to the China's escalating Covid lockdowns which could further hamper production and supply. Yesterday’s local data releases were kicked off with monthly Retail Sales figures which outperformed expectations by 0.9% to print 1.8%. This was followed by the release of the Annual Budget in the afternoon. The cornerstone theme of the budget's focus was a plan that aimed to deliver more jobs to push the unemployment rate below 4 per cent. Other focuses included supporting small business, expanding and modernising Australia’s sovereign manufacturing capability and upskilling in the digital economy. The Treasury also forecasting a deficit of A$78bn, with net debt peaking at 33.1% in June 2026. Voters will be offered $8.6bn in payments, tax rebates and cuts to fuel excise. Treasury expects the Jobless rate to drop to 3.75% in 3Q FY20. The budget is forecasting a return to real wages growth in 2022-23 by 3.25% versus an inflation rate of 3%. Local equities reacted positively with the ASX closing up 0.7%. Asian Equities fared worse with the Shanghai Comp closing down 0.3%. Commodities were mixed with Iron Ore & Copper closing -0.2% & +0.6% respectively. Only low tier data due no for the rest of the week, so geopolitics and China's developing Covid resurgence will dominate AUD moves.
USD
AUD has ground slowly higher, despite trading as low as 0.7457 overnight, it has rebounded and opens not far from its overnight highs at 0.7509 this morning. In overnight US data, JOLTS Job opening figures beat expectations of 11M, printing 11.27M. The figure outlines the number of job openings during the reported month, excluding the farming industry. This was followed by the CB consumer confidence report which beat expectations, printing 107.2. The figure is a leading indicator of consumer spending, which accounts for a majority of overall economic activity in the US. Risk sentiment was on the improve overnight with headlines outlining that Russia would sharply cut military operations near Kyiv and Chernihiv and that a meeting between Putin and Zelenskiy was possible. This helped US equities forge a session of gains; the NASDAQ was +1.9%, the S&P 500 +1.2% while the Dow Jones finished +1%. Looking ahead we have plenty of data tonight, kicked off by the preliminary ADP version of the Non-Farm Payroll data ahead of Friday's official Employment report. Also tonight we will see Quarterly GDP figures, US Crude Oil reserve figures and a speech by FOMC member George will close out the night.
EUR
AUDEUR is currently trading at 0.6773 this morning after sharply dipping a full cent and nearing lows of 67c overnight. This initial EUR strength was spurred by news of a potential troop cutback in Ukraine which may signify a new risk-off sentiment surrounding the pair and perhaps a light at the end of the tunnel for war torn Europe. The data from the EZ was not flattering with Consumer Sentiment in Germany falling to -15.5 going into April the lowest level in more than a year, and below expectations of -8.1. German import prices also fell from 1.5% to 1.3%. The ECB’s De Cos commented that the March inflation reading will be particularly negative, adding that Europe should pool resources for War-related spending. French Consumer Confidence fell to 91 in March from a prior 98. After the poor data results, EUR came off the boil and allowed AUD to recover to this morning's levels. European equities reacted positively to the updates in Ukraine with the DAX & CAC closing up 2.8% & 3.1% respectively. However, despite the positive political developments, Belgium and Netherlands both expelled a significant number of Russian diplomats who were accused of spying & Russia froze the accounts of the Polish Embassy in Moscow. Looking ahead, Spain will release its flash CPI figures for the year and ECB President Lagarde will also make a speech. No doubt the suggestion of a troop cutback will be a driving factor in the market going forward.
GBP
AUDGBP Is trading at 0.5734 this morning after a choppy overnight session, now at the highest level seen since December 2018. UK Equities were also up, FTSE closing up 0.9% as markets enjoyed positive headlines relating to Ukarine/Russia. Looking ahead, tonight The Bank of England’s Broadbent will offer his latest views on the outlook for policy settings, given the war in Ukraine. 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
AUDNZD is holding near its overnight low after dipping to 1.0828 this morning. There was little in the way of data being released save the new Building Approvals figures in NZ which beat expectations by printing at 10.5%. Looking ahead, the ANZ Business confidence report will be released later today.