Higher Global Yields Continue to Depress AUD

AUD

The AUD is trading lower across the board, susceptible to upward global yield movements overnight as money markets reprice the implied interest rates for the major currencies. Meanwhile, the US, UK, Germany, and Slovakia will provide additional military equipment to Ukraine’s forces, as a diplomatic ending seems a distant prospect. On the Russia front, President Putin is believed to have set himself four weeks to achieve some “sort of” victory in Ukraine before the big Russian victory day on May 9. Asian equities finished the session largely down with the Hang Seng and CSI 300 both -3%. The ASX actually outperformed up 0.1% on Monday, with financial stocks leading the gains. Gold and silver both gained, increasing by 0.6% and 1.1% respectively. Iron ore lost out 0.6%, and copper lost out 2.0%. A surprisingly strong result in the way of Chinese data, with CPI y/y printing at 1.5% above expectations of 1.3%, PPI y/y coming in at 8.3% over an expected 8.1%, as well as M2 Money Supply printing at 9.7% above a forecast 9.2%, and New Loans coming in at 3130B, well above estimates of 2750B. Not a bad result from China considering the drastic and widespread Covid lockdowns in place. Looking ahead and there is NAB Business Confidence due at 11.30am this morning.

USD

The AUD continues its decline against the Greenback, currently trading at 0.7415 which is 3 week lows. The Australian dollar began the week on the wrong foot, extending its losses to four consecutive days as hawkish Fed commentary drives Big Dollar strength. Wall Street closed lower to start the week as U.S yields continued to rise. The NASDAQ performed the worst and closed 2.2% lower while the S&P 500 ended the session -1.7%. U.S 10 year yields rose 7bps to new recent highs of 2.77% while oil fell 3.4% to $94.90 a barrel. This week’s first key piece of economic data for the US is due today in the form of CPI.  The headline figure for March is likely to show a further solid rise due to the boost from energy prices. The gasoline price rise alone may contribute +0.7 ppts to the monthly inflation gain. The core monthly figure should be less robust and could see some relief from used car prices which industry indicators suggest decline during the month. While the US retail sales for March are likely to have struggled amidst a continued rotation into services. Auto sales volumes provided some hint of this, declining by ~6% during the month.

EUR

The Aussie Dollar has slowly ground lower against EUR, briefly dropping to 8 day lows, currently coming in at 0.6818. The crisis between Ukraine-Russia, signals the continuation of hostilities, as peace talks faltered to provide any fresh, positive impetus. Ukrainian President Volodymir Zelenskyy said that they should not lose the possibility of a diplomatic solution to the war. At the same time, Minister Stefanishyna expects Ukraine to be given EU candidate country status in June while emphasizing that Ukraine would move fast in its application to join the EU. In equities, the DAX performed poorly coming in 0.6% lower, however the CAC fared better gaining 0.1%. Looking ahead, ZEW Economic Sentiment is to be released this evening, as well as German ZEW Economic Sentiment. Don't forget the main event on Thursday night - the ECB interest rate decision.

GBP

In what is a common theme, the Aussie Sterling pair has weakened in the last 24 hours, losing the 0.5700 handle and trading at 0.5693 at time of writing. The FTSE performed poorly losing 0.7% in the past 24 hours. On Monday, global equity markets recorded losses amid a downbeat market mood. Russia-Ukraine’s woes, worldwide higher bond yields, and China’s Covid-19 outbreak shifted sentiment. While the Russia-Ukraine crisis extended for the seventh consecutive week, the UK stated that they would provide military equipment to Ukraine. This afternoon we get the UK's employment report with the Unemployment rate expected to drop from 3.9% to 3.8%.

NZD

The Australian Dollar performed poorly against its antipodean cousin, touching 4 days lows overnight of 1.0825, presenting at 1.0872 this morning. All eyes are focused across the ditch for tomorrow's all important RBNZ interest rate decision.