- AUD/USD failed to hold above 0.7200 for a third successive session, as geopolitical angst underpinned US dollar demand.
- Geopolitics will be the highlight for the pair next week, though Aussie Q4 wage data will also be key.
AUD/USD failed to hold to the north of the 0.7200 level for a third successive session, despite solid jobs data earlier in the week keeping calls for RBA monetary tightening in H2 this year alive. At current levels in the 0.7170s, AUD/USD is trading a touch lower on the day, though still looks on course to gain about 0.7% on the week, which would mark the pair’s third successive week. Resilience in copper and gold prices has been largely negative, as far as the commodity-sensitive Aussie is concerned, by slightly lower oil and iron ore prices on the week.
Geopolitical tensions between Russia, Ukraine and NATO remain elevated as Russia continues to amass troops on Ukraine’s border and violence in Eastern Ukraine between government and separatist forces escalates, underpinning the US dollar on the final trading day of the week. That is likely the main reason why AUD/USD hasn’t been able to hold above the 0.7200 handle on Friday, or mount an attempt at testing last week’s high at 0.7250.
AUD’s resilience to the escalating geopolitical situation in Eastern Europe will be put to the test once more next week with a key face-to-face meeting between US Secretary of State Anthony Blinken and Russian Foreign Minister Sergey Lavrov in focus. Any signs the two sides come to some sort of agreement to de-escalate things could help propel the pair back above monthly highs and back towards 2022 highs in the 0.7300 area.
Otherwise, the highlight of next week’s economic calendar will be Australian Q4 Wage Price Index data out on Wednesday. An upside surprise could be the final piece in the puzzle for the RBA to formally signal rate hikes in 2022, as money markets continue to bet they will get started hiking sometime around the middle of the year. Elsewhere on the economic calendar, flash Aussie and US PMI survey results for February and the US January Core PCE inflation report could be market moving, while Fed speak will as ever be worth monitoring.