AUD/USD bulls stay in charge, looking to claim the week as theirs

• AUD/USD bulls move in to print a higher high despite conflicting drivers. 
• Ukraine crisis, commodity prices and the Fed are all in the mix. 

AUD/USD is trading firmer on Thursday and is approaching the close for North American forex markets some 0.5% higher. We are a handful of sessions until the close of the week and the price is on track for a bullish climax. The pair travelled from a low of 0.7287 to a high of 0.7367.

The fickleness of market conditions is not conducive, however, to a convincing bull trend for the antipodeans, but they are higher nevertheless. Analysts at ANZ Bank explained it as follows: Commodity-fx ''eke out gains despite broad strength in the USD emerging as bond yields there keep rising, and the EUR slips in the wake of last night’s ECB meeting. So there it is: bond yields are up, equities are down, risk appetite has retreated, key commodity indices are lower,'' yet commodity-fx, ''is still higher.''

''Illogical as that seems, it shows how fickle sentiment is right now,'' the analysts said. ''Markets know that higher US interest rates will pressure NZ rates higher, but is that a good enough reason for the Kiwi to appreciate? It’s not clear, and we continue to expect volatility over directionality.''

Meanwhile, equity markets retraced some of Wednesday’s optimism as the Ukraine-Russia talks failed to deliver progress on a ceasefire. Instead, the bombardment continues to devastate Ukraine, specifically the city of Mariupol this week. 

Both Ukraine’s Dmytro Kuleba and Russian counterpart Sergei Lavrov have made clear in duelling news conferences after the face-to-face, that they had made no progress. The Ukrainian tweeted that his counterpart “seemed to have come to talk, not to decide.” “They seek Ukraine’s surrender. This is not going to happen,” Kuleba said.

RBA & Fed divergence

 

As for central banks, today's consumer price data in the US surged for February to a 7.9% annual growth rate, according to the Labor Department, the hottest reading in forty years. The risk is not that the Fed will hike, but the decades-high CPI data suggested the FOMC could move more aggressively to curb inflation in the upcoming year, as promised by Fed Chair Jerome Powell last week. 

As a consequence, the dollar index (DXY) moved up by over 0.50% to 98.512 following the report, after falling 1.17% on Wednesday. Meanwhile, the divergence between the Fed and the Reserve Bank of Australia is there for all to see.

The RBA Governor Philip Lowe on Wednesday said a move was plausible later in the year, but he also said Australia had more scope to wait than some other developed nations. Markets are still wagering on a rise as early as June and have two hikes to 0.5% priced in by August.