Increased Rate Hike Bets Strengthen the Aussie Dollar
AUD
The Aussie Dollar is trading higher this morning across the majors and is up across the board from yesterday as several banks updated forecasts that a rate hike at next weeks RBA meeting is looking more likely due to the inflationary risks of increased oil and gas prices caused by the ongoing conflict in the Middle East. Asian equites were mixed yesterday with the Nikkei closing +1.4%, the Shenzhen +0.6% and the Hang Seng. The ASX 200 ended +0.6% as materials and financials sectors outperformed at +2% and +0.9% respectively. Another quiet day data wise for the Aussie with MI Inflation Expectations the only data point expected. Looking to Asia, the Aussie Dollar hit fresh 35 year highs against JPY, and M2 Money Supply y/y and New Loans data is set for a tentative release out of China.
USD
The AUDUSD cross is up at 0.7149 despite broader safe-haven demand keeping the greenback resilient against most other peers. The pair touched 45-month highs as the market weighed moderate inflationary prints against ongoing geopolitical volatility in the Middle East. The rate seems sensitive to headlines, particularly as optimism for a near-term end to the war fades following reports of strikes on vessels and attempts to mine the Strait of Hormuz. Another soft session on Wall St. saw the Dow Jones trading -.9%, the S&P 500 -.3%, and the Dow Jones -.1% entering the final hour of trade. U.S. 10-year yields rose 5bps to 4.2%, while Brent Crude rose 4.8% to $91.80 a barrel. Data released on Wednesday showed that U.S. consumer prices rose moderately in February, although households continued to face higher costs for gasoline and groceries. Tomorrow we have Core PCE Price Index and Prelim GDP set to release, although the data is delayed by 15 days due to the US government shutdown earlier this year.
EUR
AUDEUR is trading higher at 0.6181 and is sitting at multi-year peaks not seen since the back end of 2024. The Euro has struggled to find a foothold as the war in Iran and its impact on energy prices remain the predominant focus for regional markets. European equities opened lower across the board with the DAX down -1.6% and the CAC down -1.1%. High energy import concerns continue to dampen sentiment for the single currency as the conflict escalates. Looking ahead, the market is monitoring further developments in the Middle East, which continue to overshadow minor economic releases in the Eurozone.
GBP
AUDGBP is up this morning at 0.5331 as the Aussie continues to outpace the Pound, hovering around the best rate since January 2024. Sterling remains under pressure alongside other majors as the U.S. dollar captures safe-haven flows, though the Aussie's yield advantage has allowed the cross to gain ground. In the UK, 10-year Gilts climbed to 4.64%, and the FTSE fell 1% during the session. Traders are looking toward upcoming UK GDP figures tomorrow (exp +0.2%) and central bank commentary to see if the Pound can regain its structurally strong position. Expectations for the next Bank of England rate cut have been pushed back, with the market not fully pricing in a move until the November meeting. With a light domestic data calendar today, the cross is expected to remain sensitive to broader shifts in global risk sentiment and ongoing geopolitical developments in the Middle East.
NZD
AUDNZD is trading higher today at 1.2092 as the pair strikes fresh multi-year highs. The New Zealand dollar is struggling to keep pace with its trans-Tasman neighbor, lacking the immediate support of hawkish central bank repricing that has bolstered the Aussie. The Kiwi remains sensitive to the broader risk-off environment and the lack of safe-haven appeal in the current geopolitical climate. With a relatively quiet economic calendar for New Zealand this week, the cross is being driven primarily by the divergence in RBA rate expectations and global risk sentiment.