Australian Dollar (AUD) Rises in Spite of Geopolitical Tensions
The Australian Dollar (AUD) rose against its peers on Tuesday, shrugging off market volatility in the wake of Russia’s military action.
Instead, the ‘Aussie’ was buoyed by forecasts of an interest rate hike from the Reserve Bank of Australia (RBA). Some economists predict lift-off in June, while others are tipping an increase in August.
Looking ahead, AUD may be affected by market sentiment and alongside commodity prices today.
Pound (GBP) Sinks on Russian Military Activity
The Pound (GBP) came under significant pressure yesterday from volatile trading conditions.
Putin ordered Russian troops into eastern Ukraine late on Monday night on alleged ‘peacekeeping duties’, which western officials were quick to decry as a ‘pretext for war’; subsequently, Boris Johnson unveiled sanctions on five Russian banks and three individuals.
A speech from Bank of England (BoE) policymaker Silvana Tenreyro may influence GBP trading later tonight, although political headwinds will likely continue to dominate headlines. If a risk-off mood grips the markets, Sterling may gain against several risk-sensitive peers.
Euro (EUR) Supported by Positive German Data
Despite raging tensions between Russia, Ukraine and its Western allies, the Euro (EUR) strengthened through Tuesday’s European session.
Germany’s Ifo business climate indicator lent support, rising to 98.9 in February from 96 last month, above the 96.5 jump expected; both current conditions and expectations increased sharply.
Finalised inflation in the Eurozone could affect single currency exchange rates today, inflation is expected to be confirmed to have climbed to a record high of 5.1% in March and underpin expectations for a European Central Bank (ECB) rate hike later in the year.
US Dollar (USD) Lacks Safe-Haven Appeal on Mixed Trading Sentiment
The US Dollar (USD) was unable to find support on its safe-haven status yesterday as international leaders disagreed on the level of threat posed by Russia.
The US was sceptical from the offset, describing Russian troops’ ‘peacekeeping’ role as ‘nonsense’, but EU representative Josep Borrell suggested the military move could not be considered a ‘fully fledged invasion’.
Nevertheless, USD was buoyed later in the session by upbeat PMI data. Both manufacturing and services activity in the US increased in February 2022.
‘Greenback’ dynamics are likely to be further affected by geopolitical developments today. If a risk-off mood prevails, USD could enjoy some upside.
Canadian Dollar (CAD) Fluctuates as Crude Oil Appreciates
The Canadian Dollar (CAD) traded in a mixed range on Tuesday as oil prices rose but market volatility exerted downside. UN nations clashed in their approach to imposing Russian sanctions, with the UK taking a hard stance in comparison with the more tentative Austria, Germany and Italy.
New Zealand Dollar (NZD) Climbs on Rate Hike Expectations
The New Zealand Dollar (NZD) held strong against its peers yesterday as the Reserve Bank of New Zealand (RBNZ) is forecast to hike interest rates by another 25 basis points. Some economists speculate the central bank may signal six more back-to-back rate increases today.
Such an eventuality would likely boost the ‘Kiwi’ against its peers.
Data Releases
Feb 23rd 10:30 AUD Construction Work Done (Q4) 2.5%
Feb 23rd 11:00 NZD RBNZ Interest Rate Decision N/A
Feb 23rd 17:00 EUR German Gfk Consumer Confidence (March) -6.3
Feb 23rd 20:00 EUR Inflation Rate (Jan) 5.1%
Feb 24th 03:00 GBP BoE Tenreyro Speech N/A