Volatility across bond markets permeate currencies

Daily Currency Update

Despite little headline newsflow to start the week volatile price action saw the AUD test 0.7540 before slipping back below 0.75 US cents amid broad based US dollar strength. Direction derived from a broader repricing across global bond markets as investors revised their projections for future Fed interest rates, pricing in a series of 50 basis point rate hikes, while the Bank of Japan offered to buy 10 year bonds at 0.245%, affirming its commitment to keeping rates below the 0.25% ceiling and further widening the gap in monetary policy expectations. The AUD pushed through 94 to mark highs at 94.25 before settling lower and trading between 92.50 and 93. As markets looked to the USD the AUD faced a sustained sell off overnight, exacerbated by fears China’s persistent Covid 19 lockdowns will soon crimp demand. With almost 5% of China’s population in lockdown commodity prices tumbled through Monday with oil leading the decline giving up 120USD per barrel, marking daily lows at 113USD per barrel.

Domestic retail sales data headlines the local macroeconomic ticket, yet we expect little market reaction as our attentions remain with broader bond market performance, commodity prices and peace talks between the Russia and Ukraine.