AUD News: Foreign Currency Market Wrap Up | 20 February 2024

• While the AUD traditionally rises with global equity markets, it has struggled despite the S&P 500 reaching record highs.
• Factors contributing to this shift include mean reversion for global currencies from late 2023 trends and the increased correlation between Chinese equity performance and AUD returns since the beginning of the year.

The NZD/AUD had soared to new heights off the back of the RBNZ push toward another potential rate rise. If they did lift rates, that would have brought them up to 6%, in line with some of the highest in the world. While present demand for the NZD was holding strong, this rally could have been spoiled should the RBNZ have released weaker-than-expected inflation expectations Tuesday last week.

NZD - AUD had hit its highest level since the end of May 2023, sitting at 0.943 (12.2.24 / 11 AM AEDT) NZ.

Despite a challenging start to the year for the AUD, UBS remained optimistic about its performance throughout 2024. According to Vassili Serebriakov, a strategist at UBS, there were compelling domestic reasons for AUD resilience, despite acknowledging increased risks.

The positive stance was influenced by the Reserve Bank of Australia's recent policy meeting, where returning inflation to target was emphasised as the "highest priority." While additional tightening was deemed unlikely at that stage, the somewhat hawkish tone of Governor Bullock's press conference was seen as supportive for the AUD, reinforcing the RBA's commitment to managing inflation.

On a global scale, the Pound Sterling (GBP) faced challenges, extending its losing streak against the US Dollar (USD) for a fourth consecutive week. This trend was attributed to the market's recalibration of US Federal Reserve interest rate cut expectations after a strong January Nonfarm Payrolls report, which kept the USD broadly elevated.

Additionally, in the EURUSD market, the technical perspective indicated a neutralised price action. The 100-hour moving average had acted as a support, preventing a further decline, and had stood at 1.0762.