The Pair Sheds Weight

The AUD/USD currency pair continued involuntarily on its intraday lows in the vicinity of 0.7250, gone down by 0.48% on the day as the market’s sentiment rose while the European session was about to open for trading on Monday.

The risk measurement gives justification to the market’s latest grim concerns, including various anxieties before the week’s major Federal Open Market Committee meeting.


AUD/USD price chart. Source TradingView

The little progress made in the Russia-Ukraine peace negotiations could not retail the investment of AUD/USD buyers as continued Russia attacks on Ukraine and demands by the former to the latter to surrender, as well as a continued call for more sanctions on Russia by Ukraine, keeps the conflict more intense.

Russia to Struggle Harder with Debts

Comments from the International Monetary Funds are staying in the same line with Ukraine. The IMF Managing Director Kristalina Georgieva said at the Face of the Nation interview with CBS that it is possible for Russia to default on its debts as the sanctions keep rolling in for its war in Ukraine. She stated, however, that it would not cause global financial chaos.

Meanwhile, in China, there are increasing daily reports of COVID cases. The country has reported the highest surge since May 2020 and has consequently imposed a lockdown in two states as it recalled the woes incurred from the virus and how it weighed negatively on foreign exchanges.

Another set of factors posing a challenge to the pair in the United States Treasury bond yields and its strength as the five-year coupon gains a renewal to an all-time height over 2.0% in the midst of high inflation speculations. The ten-year break-even inflation rates of the St. Louis Federal Reserve report are also a factor to be considered.  

While all those go on, the S&P 500 futures shed some weight in the Asian session, and the ASX 200 also did the same. The equity market in China is lagging on the back foot as there are expectations that the People’s Bank of China would cut rates.

Therefore, the risk aversion mood might continue to weigh on the AUD/USD currency pair for a while till the commodities gain new upside momentum, and it doesn’t look feasible as there are new challenges in China. Even at that, anxieties further in the week ahead of the Federal Open Market Committee meeting might give way for the pair to shed recent losses if the Australian jobs data meets up with forecasts. Importantly, it should be noted that the Reserve Bank of Australia’s meeting minutes goes to confirm that the Reserve Governor supports an interest rate increase by the end of the year.