23rd February 2022 - AUD eases from two-week high, holds above 0.7200 amid improving risk sentiment


Market Headlines

Short-lived optimism ruled financial markets during London trading hours, as Ukrainian President Volodymyr Zelenskyy said that he believes there would not be war nor a wider escalation. However, European and American authorities have anticipated sanctions on Russia. The positive sentiment did not last long, and risk aversion dominated the US session.


The UK was the first to take action, announcing the country would sanction five Russian banks and three individuals, adding that this is just the first tranche of what the government is prepared to do. Also, Ursula von der Leyen, President of the European Commission, tweeted that “the Union remains united in its support for Ukraine's sovereignty and territorial integrity” and that “a first package of sanctions will be formally tabled today.”


US President Joe Biden gave a press conference on the matter. Among other things, he said: “We have no intention of fighting Russia,” adding that US forces in Europe will help Baltic allies, but "these are totally defensive moves on our part." He says the U.S. and allies "will defend every inch of NATO territory and abide by the commitments we made to NATO."


The US dollar index is down 0.1% on the day. EUR bounced off 1.1288 to 1.1367. USD/JPY rose from 114.65 to 115.24. AUD rose from 0.7190 to 0.7234. NZD rose from 0.6710 to 0.6755. AUD/NZD fell from 1.0740 to 1.0700.


US 2yr treasury yields rose from 1.42% to 1.54%, while the 10yr yield rose from 1.85% to 1.96%. Markets continue to price some chance of a 50bp rate hike in March 2022. Australian 3yr government bond yields (futures) rose from 1.65% to 1.73%, while the 10yr yield rose from 2.19% to 2.28%. The first RBA rate is priced for June 2022.


Commodities, Brent crude oil futures rose 1.7% to $97 – a high since 2014, copper fell 0.3%, gold fell 0.1%, and iron ore fell 1.2% to $136.


Overnight Currency Range

AUD/USD 0.7172 0.7233

EUR/USD 1.1288 1.1367

GBP/USD 1.3539 1.3604

USD/JPY 114.50 115.24

NZD/USD 0.6681 0.6754

USD/CAD 1.2719 1.2774

USD/CNH 6.3188 6.3445

AUD/JPY 82.08 83.18

AUD/NZD 1.0700 1.0737


AUD Thoughts

A busier day ahead beginning in Australia where Q4 wages data is due at 11.30am Sydney time. A lift in individual arrangement wages is expected to drive robust gains in the Q4 wage price index, forecast of 0.7%. Meanwhile, a broad-based rebound in construction work is anticipated in Q4 with stimulus support aiding the recovery from the delta lockdowns


Later today, the market expects the RBNZ to lift the Official Cash Rate by 25 basis points to 1.00% at its February policy meeting. There will be a focus on the RBNZ’s revised forecast of the peak in the cash rate, of which market anticipates an upward movement closer to a 3% peak. Markets will continue to monitor the Ukraine/Russia situation closely ….


AUD/USD traded remarkably well yesterday but remained in a 0.7172/0.7233, while offering interest remains in the 0.7240/50 region while demand lies ahead of 0.7100.


Event Risk Data Today

Aust: A lift in individual arrangement wages is expected to drive robust gains in the Q4 wage price index, forecast of 0.7%. Meanwhile, a broad-based rebound in construction work is anticipated in Q4 with stimulus support aiding the recovery from the delta lockdowns.


NZ: Market expects the RBNZ to lift the Official Cash Rate by 25 basis points to 1.00% at its February policy meeting. There will be a focus on the RBNZ’s revised forecast of the peak in the cash rate, of which market anticipates an upward movement closer to a 3% peak.


Eur: The final estimate of January’s CPI will confirm the robust contribution of energy inflation (market f/c: 0.3%mth; 5.1%yr).


US: The FOMC’s Daly is due to speak at the Los Angeles World Affairs Council

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