Rollercoaster Week for AUD Finishing in the Red

AUD

The Aussie Dollar continues to lose momentum, struggling to maintain its post RBA gains amid more Hawkish sentiment out of the FOMC and increasing tensions regarding the Russia-Ukraine war in Eastern Europe.  In local Equities the ASX was down 0.6%, its largest fall in the more than 3 weeks, with tech stocks down a further 3%, the NIKKEI was the worst performer down 1.7%. In Commodities, Gold remains relatively unchanged and Iron Ore up 1.1%, as commodities become more lucrative due to the war between Russia and Ukraine and the scarcity sentiment looms. Looking ahead, we have The Financial Stability report this morning likely to delve deeper into household finances, including the ability for indebted households to deal with higher interest rates, which are potentially incoming as highlighted in the RBA announcement on Tuesday. Central Bank speak will likely continue to dominate the AUD into the week ahead, with worldwide interest rate movements and attempts at ‘inflation taming’ impact markets and investor sentiment.

USD

The Aussie Dollar has dropped from Tuesday's high above 0.76, losing the best part of 2 cents and opening at 0.7481 at time of writing. Overnight the Fed's Bullard joined the chorus of hawkish Fed speakers as he said the FED was well behind the curve in terms of dealing with inflation and suggested rates would need to be around 3.5% to fight high inflation. Adding to USD strength; weekly jobless claims data was mixed with initial claims falling to 166k from a positively revised 171k and beating expectations of 200k while continuing claims rose to 1.523 mio from a negatively revised 1.506 mio to fall short of expectations of 1.302 mio. Wall St made moderate gains overnight during what was a relatively calm session, the S&P 500 led the way and was up 0.5%, while the Dow Jones and the NASDAQ closed +.3% and +.1% respectively. US 10 year yields rose a further 6bps to 2.65% while oil edged 1% higher to $97 a barrel. Looking ahead, Fed member comments will remain the flavour of the month.

EUR

In a relatively steady last 24hrs of trade, the AUDEUR remains opens at 0.6877 at time of writing, dipping slightly from yesterday. Overnight Russian Foreign minister Sergey Lavrov announced that Ukraine had presented new peace proposals on Wednesday, with Ukraine proposing to discuss the status of Crimea and Donbas. European Equities briefly reacted positively to the news before reversing quickly as Lavrov later clarified that the new proposals were unacceptable to Russia. In geo-political news, the UN voted to remove Russia from the Human Rights Panel while the US Senate was said to have the votes to ban oil imports from Russia. It is evident that the ECB has decided to prioritize taming inflation over supporting growth and thus looking forward, this should influence EUR. The next ECB monetary policy meeting is fast approaching next week and markets are furiously debating potentially moves in the interest rate. The ECB minutes showed that many members wanted to take immediate action to normalise policy though there were differing opinions on how persistent inflation would be. 

GBP

The AUD has stemmed the bleeding after an aggressive retracement lower from Tuesday's 5-year highs, trading sideways for the majority of the last 24hrs, opening at 0.5721. Weighing in on the Pound is the cost-of-living crisis in the UK, soaring global energy and food prices are also of concern. The FTSE was down 0.2% amidst the downbeat trading atmosphere. Looking forward, next week will deliver a raft of data releases from the UK, the highlight being Wednesday afternoon's CPI data.

NZD

AUDNZD drops slightly, currently at 1.08542, as the market remains relatively static. Recent AUD ascendency could come under fire next week with Wednesday's RBNZ meeting which is the next opportunity for interest rate hike across the ditch. RBNZ have already implemented 3 consecutive rate hikes, with the NZ OCR sitting currently at 1.0% (vs Australia's current OCR of 0.1%).