A further slowing in growth
AUD volatility picked up in March, almost all accounted for by Global factors.
AUD volatility picked up in March. The 3.7 cents hi-lo range exceeded both February’s 2.5 cents range and January 3.5 cents. The low of 0.7165 was on March 15 and the high of 0.7540 (strongest since 29 October 2021) on March 28.
Domestic influences on the currency in March were slight, the RBA coming and going without fanfare at the start of the month and Q4 GDP a day later printing in line with consensus (4.2% versus 4.1% expected). The better-than-expected February employment report at mid-month was AUD-supportive though, playing with the grain of an already-appreciating currency, employment +77.4k, more than double the expected rise, and unemployment hitting 4.0% for the first time since 2008 (from 4.2% and 4.1% expected).
Global factors accounted for almost all the volatility (as per usual). In the early part of the month, it was a tug-of-war between rapidly rising commodity prices – oil especially after the US voiced support for an oil embargo against Russia and sent Brent crude as high s $139 – but deteriorating risk sentiment. Commodity prices won out, leading AUD/USD up from around 0.7250 to above 0.7400.
For the subsequent three weeks of March, the commodity price backdrop became more nuanced. The improvement in risk sentiment – driven in large part by as yet unjustified optimism towards an early cessation of fighting in Ukraine and some sort of peace agreement – became the dominant influence, AUD/USD lifting from below 0.72 to its 0.7540 high.
The subsequent AUD set-back at the end of the month, to below 0.75, was off the back of a 6% drop in oil prices after the US announced its intention to release 1 million barrels of oil out of its Strategic Petroleum Reserve every day for 6 months (180 million barrels in total).
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