The Australian dollar is looking resilient despite heightened geopolitical risks


The Australian dollar put in a resilient performance on Wednesday, consolidating upon recent gains despite a lift in geopolitical tensions during the session.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7756 , -0.0003 , -0.04%
AUD/JPY 82.83 , -0.34 , -0.41%
AUD/CNH 4.8648 , -0.0047 , -0.10%
AUD/EUR 0.6271 , -0.0008 , -0.13%
AUD/GBP 0.5469 , -0.0004 , -0.07%
AUD/NZD 1.0535 , -0.0004 , -0.04%
AUD/CAD 0.975 , -0.0023 , -0.24%

As the scoreboard reveals, the Aussie was modestly lower against all of the major crosses, largely reflecting a lift in geopolitical tensions, this time between the United States and Russia.

This tweet from US President Donald Trump did most of the damage, dampening risk appetite among investors.

“The missile tweet was sufficient to frighten the horses to some extent, dampening risk sentiment,” said David de Garis, Economist at the National Australia Bank.

The tweet saw the Aussie fall heavily against the Japanese yen, reflecting increased geopolitical concern among investors. It also saw the crude oil price surge higher, helping to lift the Canadian dollar during the session.

Against the US dollar, the Aussie showed little reaction to either the release of US CPI data for March or the minutes of the Fed’s March monetary policy meeting.

“The US March CPI inflation numbers rolled in pretty much as expected on an annual basis after revisions were taken into account, despite the lower than expected headline monthly outcome of 0.1%,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

“Core CPI lifted from 1.8% to 2.1% year-on-year, with headline CPI at 2.4%.”

Grace said there was also little reaction to the Fed minutes that were, at the margin, slightly more hawkish than some had expected.

“The minutes… indicated participants were becoming more concerned about the stronger economy generating inflation pressures, particularly in light of the fiscal stimulus,” Grace said.

Despite the hawkish undertones in the minutes, Grace said the Aussie was supported by modest rises in commodity prices over the session.

AUD/USD Hourly Chart

Turning to the day ahead, there’s little on the Asian calendar that appears likely to excite traders.

Australia will release housing finance data for February at 11.30am AEST.

John McDermott, RBNZ Assistant Governor, along with BoJ Governor Haruhiko Kuroda, will also deliver speeches.

Later in the session, data highlights include Eurozone industrial production, French CPI along with trade prices and jobless claims from the United States.

The ECB will also release the minutes of its March monetary policy meeting.

On the speaking front, Benoit Coure, Jens Weidmann and Mark Carney will all be in action in the second half of the day.

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