Australian Dollar (AUD) Rises as Investors Anticipate RBA Rate Hikes
The Australian Dollar (AUD) gained against its peers yesterday as AUD investors remained optimistic regarding the forward guidance of the Reserve Bank of Australia (RBA).
Although the central bank has signalled that it is prepared to be patient in rising rates, markets are more confident that inflationary conditions will encourage a rate hike by summer.
Also supporting the ‘Aussie’ are consistently rising commodity prices. Australia’s main exports – metals, coals and grains – have been in higher demand recently amidst conflict-induced supply concerns.
Australia’s GDP figures are likely to influence trading today – if the economy expands as expected, AUD may strengthen.
Pound (GBP) Faces Mixed Data, Risk-Off Trading
The Pound (GBP) traded in a mixed range on Tuesday as UK data printed mixed and risk-off headwinds diverted support elsewhere.
Bank of England (BoE) consumer credit increased by less than expected – £0.608bn as opposed to £1.05bn – but the UK’s finalised manufacturing PMI revealed an unexpected increase in manufacturing activity, supplying some upside.
A lack of data leaves Sterling to trade on external factors today – if Russian troops continue to strike residential areas in addition to military bases, risk-off sentiment is likely to deepen, dampening GBP trade.
Euro (EUR) Sinks in spite of Strong German GDP
The Euro (EUR) tumbled against its rival currencies yesterday, as strength in the US Dollar (USD) applied EUR downside.
A rise in German inflation was insufficient to buoy the single currency as European Central Bank (ECB) officials maintain a dovish tone; EUR investors are also trading bearishly over concerns that energy supplies from Russia could be cut off.
Eurozone inflation could bolster the Euro today if it rises as expected, encouraging the ECB to tighten monetary policy.
US Dollar (USD) Supported by Risk Sentiment
The US Dollar lifted on Tuesday as fighting in Ukraine weighed upon market mood, drawing support towards safe-haven currencies.
Also lending upside, February’s ISM manufacturing PMI exceeded expectations, printing at 58.6 rather than 58 as forecast. This marked the second monthly rise in a row.
US employment data could influence the ‘Greenback’ today – if private business hires increase in line with expectations, USD may enjoy tailwinds.
Canadian Dollar (CAD) Buoyed by GDP
The Canadian Dollar (CAD) climbed yesterday as Canada’s annualised GDP reading exceeded expectations, coming in at 6.7%.
Tomorrow’s interest rate decision from the Bank of Canada (BoC) is likely to affect CAD exchange rates, lending support if policymakers strike a hawkish tone.
New Zealand Dollar (NZD) Wavers amid Lack of Data
The New Zealand Dollar (NZD) fluctuated on Tuesday as a lack of domestic data exposed the ‘Kiwi’ to losses. Significant downside was averted due to Australian Dollar strength, and the currencies’ positive correlation.
Data Releases
Mar 2nd 10:30 AUD GDP Growth Rate (Q4) 3%
Mar 2nd 18:55 EUR German Unemployment Rate (Feb) 5.1%
Mar 2nd 20:00 EUR Inflation Rate Flash (Feb) 5.4%
Mar 2nd 23:15 USD ADP Employment Change (Feb) 388K
Mar 3rd 00:30 USD Fed Bullard Speech N/A
Mar 3rd 01:00 CAD BoC Interest Rate Decision 0.5%
Mar 3rd 01:00 USD Fed Chair Powell Testimony N/A