AUD lifts as tension in Ukraine eases

Australian Dollar:

The Australian dollar began Tuesday just shy of the US 91 cent mark after a strong start to the week on Monday. As the day began the Aussie drifted in a tight range as investors awaited Monetary Policy Meeting Minutes released locally. Just before midday the minutes came out indicating another interest rate cut is looking doubtful and will remain at 2.5 per cent. The RBA stated the economy is showing positive signs even in the wake of a record high unemployment rate and a declining mining industry. Shortly after the Aussie spiked up to break the US 91 cent barrier again but was met with strong resistance quickly retreating back below to the daily open. As the day progressed the AUD traded sideways once more awaiting US figures and development from the crisis out of the Ukraine.  Overnight the AUD managed to shrug aside positive data out of the US as sentiment in the market improved over President Putin announcing Russia is not seeking a partition of the Ukraine. The AUD opens today stronger against the US at 0.9125 as investors turn their focus from Europe tonight to the US which will give further guidance as to whether there will be further tapering from the US Federal reserve.

• We expect a range today of 0.9075 – 0.9170

New Zealand Dollar:

The New Zealand Dollar spent most of the Asian session trading in a tight range on Tuesday as investors were at the mercy of offshore data for direction. The biggest move for the Kiwi during the morning came after the Australian monetary policy meeting minutes. The Kiwi jumped up to touch daily highs of 0.8578 however just like its cross Tasman counterpart the NZD quickly retraced down to the daily open. Overnight the NZD rallied as market outlook improved over the current situation in Europe. The Kiwi was the strongest performer on Tuesday touching 10 month highs of 0.8639 opening today significantly stronger against the Greenback at 0.8619. Prime Minister John Key’s announced in his visit to China that the New Zealand dollar will be the fourth currency to be directly tradeable against the Yuan which also helped bolster the Kiwi across the market. Overnight all eyes will be on the US Federal reserve as they will give indication as to whether they will continue to taper their bond-buying program.

• We expect a range today of 0.8585 – 0.8680

Great British Pound:

The British Pound began Tuesday trying to make back some of the losses earlier in the week creeping up as the Asian session began against most majors. Against the Greenback the GBP remained in a tight 11 point range as investors awaited key US data being released overnight and a further update on the development of the current crisis in the Ukraine. The Sterling managed to gain against the higher yielding currencies however gains were softened by the Australian monetary policy meeting minutes released early on. Overnight the GBP lost ground across the board and was one of the worse performing majors touching 5 week lows against the Greenback. The GBP stumbled after there was an injury during an assault near the Crimean capital even after market sentiment eased due to Russian President Putin earlier claimed that Russia is not seeking a partition of Ukraine. Today the GBP opens weaker against the Greenback today at 1.6588. Similarly the GBP opens lower against the AUD and NZD at 1.8178 and 1.9247 respectively.

• We expect a range today of 1.8120 – 1.8275

Majors:

The Euro spent the most part of Tuesday’s Asian session slowly edging higher against the US dollar however still managed to gain in a tight range. The Euro touched highs of 1.3936 early on and lows of 1.3920 as the session progressed.

The big news overnight came out of Russia as President Vladimir Putin announced that Russia will not be seeking a partition of Ukraine. This indicates they would not be seeking territory further than Crimea. The news comes a day after the president acknowledged results from a referendum vote in Crimea. The vote saw an overwhelming majority choose to split from the Ukraine, whilst the European Union and the U.S. have made it very clear they believe the vote to be illegal and have imposed sanctions. 

In US data overnight the market saw building approvals reaching a four month high after a poor showing in January. Figures indicated an annual rate of inflation slowing whilst US consumer prices increased in line with expected by 0.1 per cent.

Overall the Euro today opens again at similar levels to Tuesday as the market will firmly turn its attention to the week’s main event with the US Federal Reserve meeting. Tapering is expected to continue by another US10 billion when the meeting is held early Thursday morning.

Data releases:

• AUD: MI Leading Index m/m
• NZD: Current Account
• JPY: Trade Balance, All Industries Activity m/m, BOJ Gov Kuroda Speaks
• GBP: Claimant Count Change, MPC Asset Purchase Facility Votes, MPC Official Bank Rate Votes, Unemployment Rate, Average Earnings Index 3m/y, Annual Budget Release
• EUR: German 10-y Bond Auction
• USD: Current Account, Crude Oil Inventories, FOMC Economic Projections, FOMC Statement, Federal Funds Rate, FOMC Press Conference