Australian dollar (AUD) wavers as RBA hikes rates
The Reserve Bank of Australia’s (RBA) latest interest rate decision triggered some turbulence in the Australian dollar (AUD) yesterday.
While the bank hiked rates, as expected, the 5-4 vote split was surprisingly narrow. However, after the initial choppy reaction, AUD managed to stabilise and hold steady.
Today, global risk dynamics could determine AUD’s direction. Investors are likely to keep a watchful eye on events in the Middle East.
New Zealand dollar (NZD) stumbles in risk-off trade
The New Zealand dollar (NZD) slipped yesterday, as a broadly risk-off market mood weighed on the ‘kiwi’. Risk appetite recovered slightly later in the session, but NZD struggled to recoup its losses.
Risk sentiment could drive NZD exchange rates again today. Any shifts in mood, particularly amid the ongoing crisis in the Middle East, could infuse the ‘kiwi’ with volatility.
Pound (GBP) directionless amid lack of data
The pound (GBP) continued to move without a clear trajectory yesterday as British economic data remained thin on the ground.
Comments from Chancellor Rachel Reeves failed to move the needle on GBP, as she delivered the Mais lecture. Although she tried to strike an optimistic tone, the UK economy has its challenges ahead.
Sterling may remain muted today amid an ongoing lack of UK data and hesitancy ahead of tomorrow’s rate decision from the Bank of England (BoE).
Euro (EUR) resilient despite dire German data
The euro (EUR) also traded in a wide range yesterday, although the single currency managed to shrug off some abysmal German data thanks to its negative correlation with a falling US dollar (USD).
Germany’s latest ZEW economic sentiment index collapsed from 58.3 to -0.5 in March – its third-steepest drop on record – amid the crisis in the Middle East.
Today, the Eurozone’s final consumer price index for February is scheduled for release, although it may not have much impact on EUR unless it deviates from the previous estimate.
US dollar (USD) retreats as risk appetite improves
The safe-haven US dollar initially ticked higher yesterday amid the risk-off market mood, but started to lose ground as sentiment improved during the European session.
In addition, USD faced pressure as markets reassessed Federal Reserve policy expectations, with analysts pushing back on recent speculation that the Fed could hike rates this year.
Looking ahead, US produce price inflation and factory orders could impact USD today. However, movement may be limited ahead of the Fed policy announcement early tomorrow morning.
Canadian dollar (CAD) pulls back alongside USD and oil
The Canadian dollar (CAD) moved in tandem with the US dollar yesterday, due to CAD’s positive correlation with USD, while a rise and fall in oil prices also influenced the crude-linked ‘loonie’.
The Bank of Canada (BoC) will announce its latest interest rate decision later today. No policy changes are expected, but any signals that the bank expects rising energy prices to push up inflation could support CAD.
Data releases
20:00 EUR Inflation Rate (Feb)
22:30 USD PPI (Feb)
23:45 CAD BoC Interest Rate Decision
00:00 USD Factory Orders (Jan)