AUD/USD recovers to retake 0.73 level

Daily Currency Update

Volatility continues to reverberate through markets with the Australian dollar reversing course again and climbing 0.88% to open this morning at 0.7326. Global equities have rebounded forcefully while commodities have broadly fallen. Rates markets have also jumped significantly, and European currencies have appreciated as much as 1.7%.

The shift to optimism in risk sentiment is hard to pin down but there are hints that President Putin and President Zelensky may be tentatively opening themselves to a compromise. Zelensky in particular has recently called on Putin for continued dialogue, stressing that Ukraine is ready to talk and seek compromises, but is not ready to capitulate. He also mentioned that he has ‘cooled’ on the idea of joining NATO. Adding to the optimism are reports that the EU’s plan to issue joint bonds may start with the delay of the planned withdrawal of their quantitative easing program. This helped spur asset pricing higher and assisted equity markets with their recovery. In turn, safe-haven currencies retreated and risk-aligned currencies like the Australian dollar rebounded.

Moving into Thursday, all eyes remain fixed on the conflict in Ukraine. The ECB will also meet and release their latest Monetary Policy Statement which will be of keen interest. Overnight, the US is set to release their CPI figures as well.