AUD consolidates gains on pullback in US bond rates

Daily Currency Update

The Australian dollar tracked sideways through trade on Wednesday bouncing between 0.7505 and 0.7535. Having enjoyed a period of extreme volatility since the outbreak of conflict between Russia and Ukraine, markets appeared to take stock consolidating recent moves across equities, bond yields and currencies. While optimism surrounding recent peace talks faded, the AUD remained well-bid, bolstered by sustained and elevated key commodity prices and a broadly weaker USD. A pullback in US bond yields has helped sustain the AUD’s extension above 0.75 with resistance forming on moves approaching 0.7540/50.

With little of note on today's macroeconomic ticket, our attentions turn to Chinese PMI data, expected to soften given extensive lockdowns across key provinces and US PCE data, the Fed’s preferred measure for inflation. With expectations that the PCE deflator index will hit 5.5%- its highest level in over 40 years, we are keenly attuned to any response from Fed officials and the possible impact on interest rate expectations as yields continue to be a key factor in driving direction.