AUD Corrects After Stellar Start to April
AUD
The Aussie dollar has suffered against most majors losing the post-RBA gains and instead now struggling to maintain its upward momentum amid more Hawkish sentiment out of the FOMC and increasing tensions regarding the Russia-Ukraine war in Eastern Europe. Yesterday afternoon the RBA's newly appointed Deputy Governor Michele Bullock implied we should expect some upward revisions to our inflation forecast due later this month. In local Equities the ASX was down 0.5%, the NIKKEI down 1.6%, while the Shanghai Comp remained overall unchanged at close despite the Hang Seng performing the worst, down 1.9%, after returning from a market holiday. In Commodities, Gold remains unchanged, Iron Ore down -1.3%. Looking ahead and we have local Trade Balance figures this morning, however the main driver for AUD so far this week has been as result of Central Bank speak, of which there is plenty due overseas before the week is out.
USD
The Aussie Dollar has relapsed from Tuesday night's high in rarefied air above 0.76, now opening at 0.7518 at time of writing. The resurgent USD is a result of the FED's even more hawkish statement surrounding possible imminent 50bps interest rate hikes. Last night's FOMC Meeting Minutes further demonstrating that many Fed members would have supported a 50bp hike except for the uncertainty caused by the conflict in Ukraine with 50bp hikes likely to be appropriate in meetings to come. The FED’s Harker became the latest dove to change his tune to that of a more hawkish one stating they had “acutely concern” that inflation was beginning to get out of control and swift action was needed before it became unanchored. The minutes also brought light to the FED's support of further tightening Quantitative Easing, which would be phased in over a number of months and capped at $95 bio per month. US Equities suffered overnight with the Dow Jones down 0.4%, S&P 500 down 1.0% and the NASDAQ fairing worst down 2.2%. While in Commodities, Crude Oil down by 4.9%. Looking ahead, tonight we are set to see Unemployment Claims, followed by FOMC Member Bullard Speaking throughout the early morning and followed by Treasury Sec Yellen hitting the stands herself. There is also data on the ticket with Core Retail Sales m/m and Retail Sales m/m data.
EUR
Fairing similarly with other major pairs the AUDEUR has seen itself losing the last 2 day's gains now trading at 0.6894 at time of writing. A small blow to the pair yet, comparatively no more than a hiccup with the Aussie still maintaining its 5 year highs amid the uncertainty of the Eurozone’s macroeconomic response to the Russian invasion of Ukraine unfolding on the eastern border. A new packet of sanctions on the cards in light of alleged Russian war crimes is set to be actioned quite imminently. In local Euro market news, the German February Factory orders fell 2.2% m/m for the first time in 4 months, missing expectations of -0.3%. PPI m/m data slightly down against expectations at 1.1% against predicted 1.2% and previous 5.1%. We also heard Russia said Foreign banks rejected the $646.2m Eurobond payments. In European Equities Eurostoxx 50 was down 0.4% following suit with the majority of global equity markets. Looking ahead and tonight the minutes from the ECB’s March meeting should shed light on the rationale behind the decision to taper asset purchases more quickly, despite the economic uncertainties arising from Putin’s invasion of Ukraine. It seems the ECB has decided to prioritize taming inflation over supporting growth, and it is suspect there were only a handful of dissenting voices amongst the 23 General Council members. What is understood is that the ECB bias is predominantly slanted towards normalising policy even faster rather than the contrary, certainly in light of the sharp upward revisions to staff inflation projections presented at this meeting, meaning pundits are expecting hawkish rhetoric in the near future.
GBP
The AUD is now trading lower at 0.5745 against the Sterling after dampening market sentiment has pushed the pair out of the 0.58 bracket it had found in the last two days. Following other global bourses, the FTSE was down 0.3% as markets processed the implications of a world with quickly rising interest rates. Little local market news out of the United Kingdom today, however MPC Member Pill is due to hit the wires this evening.
NZD
AUD is slightly off last night's lofty heights, trading back at 1.0855 this morning. Yesterday's Milk Price Auction came in as expected, as did the ANZ Commodity Prices, neither moving markets. No glaringly obvious reason for the AUD pullback here, perhaps an element of profit taking has been at play considering AUD's stellar start to April.