AUD Drops Due to Safe Haven Demand

AUD

The Australian Dollar opens down against the majors this morning as military strikes between the US and Iran continue, uncertainty lays ahead. Due to the inflationary risks of rising oil and gas prices, markets are pricing in around a 30% chance of a 25-basis-point hike in March and fully expect tightening by May. Asian equities ended the session down; the Nikkei fell -3.1%, Shenzhen -1.5%, and the Hang Seng -1.1%. Locally, the ASX 200 ended -1.3% lower, as materials (-3.1%) and consumer discretionary (-2.8%) led the losses. Today we have the release of Australia's GDP q/q; Macquarie Strategy expects a strong print of 0.7%. The data should reflect a shift back toward private demand, with household consumption acting as the key driver of growth late last year.

USD

AUDUSD slid dramatically overnight opening at 0.7039 after momentarily dropping to 0.6980. The USD surged on safe-haven demand as Middle East tensions fuel expectations of prolonged global inflation. Wall St. had another volatile session with the major indices bouncing off their intraday lows heading into the last hour of trade, with the S&P 500 -1%, Dow -0.5% and the Nasdaq -0.8%. WTI Crude jumped nearly 10% after Iraq started shutting oil production as their storage reached capacity, before retracing gains to trade +3.1% to US$73.50. The United States is increasingly viewed as the ultimate safe haven right now, supported by its energy self-sufficiency and resilient economic data. President Donald Trump also noted the war could continue for weeks, keeping markets defensive. All eyes are on the progression of the war as the major driver. Looking at the economic calendar, early tomorrow morning will see US ADP Non-Farm Employment Change and ISM Services PMI forecasted at +50k and 53.5 respectively.

EUR

AUDEUR opens flat at 0.6061, trading in a range of 0.6014/.60706 overnight . The Euro was hit hard overnight by severe energy import concerns as the conflict escalates. (Note: The Japanese Yen faces similar energy pressures). European equities opened lower across the board with the DAX and CAC closing -3.4% and -3.5% respectively. The Eurozone Unemployment Rate for January will be posted later tonight. The rate is likely to remain unchanged at 6.2%. Despite soft overall growth in the Eurozone, unemployment has surprised to the downside in recent months.
 

GBP

AUDGBP is sitting lower today at 0.5268. The FTSE followed suit closing in the red, coming in at -2.7%. During the London lunch session, GBP and other currency pairs continued to weaken broadly against a dominant US Dollar. The GBP is weakening due to a combination of poor labour market data, expectations of further BoE rate cuts, and broader economic stagnation weighing on investor confidence. 

NZD

AUDNZD is up from yesterday, trading at 1.1955. The New Zealand Dollar is struggling to find a foothold in the current risk-off environment, lacking the safe-haven appeal needed to weather the geopolitical uncertainty driving the major pairs. With no major domestic data out this week, the NZD remains largely driven by broader market sentiment rather than local fundamentals.