AUD shrugs aside risk off bias, rallying on the heels of elevated commodity prices

Daily Currency Update

The Australian dollar rallied through trade on Monday, surging back through 0.7250 US cents. A risk off tone enveloped markets on open yesterday as investors digested events of the weekend, absorbing the impact of fresh sanctions and restrictions on Russia’s access to the worlds financial network. Having marked intraday lows at 0.7160 the AUD tracked sideways for much of the domestic session before trending higher overnight. Risk aversion gave way to new demand as markets looked to pare back monetary policy expectations, forcing treasury rates lower, while commodities maintain an upward bias. Oil prices touched $105 a barrel while wheat and corn remain elevated. The correction in US rate expectations coupled with the commodity upside helped propel the AUD through 0.72 and 0.7250 marking intraday highs at 0.7260.

Our attentions today remain with developments in Eastern Europe as macroeconomic data takes a backseat to geo-political tensions. We expect the RBA’s policy update and rate statement will have little to no impact on AUD value. The bank has highlighted the need for patience, pointing to a sustained elevation in Wages and CPI inflation before moving off record low interest rates. With its policy view on hold for now the AUD is likely to maintain its range between 0.7070 and 0.7320.