Commodity prices continue to drive AUD gains

Key Movers

Moves across currency markets were again well contained when compared with price action seen across other financial assets. The Canadian dollar was the day’s top performer advancing near three-quarters of a percent following the Bank of Canada’s decision to raise interest rates by 25 basis points, joining the global monetary policy tightening cycle. With inflation reaching new highs and expected to drift higher still, policymakers confirmed a series of interest rate adjustments and a balance sheet review was appropriate. At the other end of the scale, the euro sunk to fresh 18-month lows touching supports at 1.1060 before edging back above 1.11 on a late surge in risk demand. With European gas futures continuing to rise and supply constraints already exacerbating inflation pressures there is a fear the war will tip Europe back into recession as the ECB battles low growth and excessive price pressures.

Fed Chair Jerome Powell seemingly rubber-stamped a rate hike later this month, suggesting a 50-point hike was not out of the question should inflation pressures remain elevated. Powell was however careful to highlight recent developments in Ukraine and a higher level of uncertainty that may require a “nimble” policy approach moving forward. Our attentions today remain with Russia and Ukraine with more Powell testimony and ECB meeting minutes offering background macro noise.