The Australian dollar has reversed directions on Thursday, as AUD/USD is trading at 0.7172, down 0.86% on the day.
Ukraine invasion sends Aussie tumbling
The tense standoff between Russia and Ukraine which had been building for days exploded earlier today, as Russian forces launched an invasion of Ukraine. Details are still sketchy, but there are reports of Russian troops advancing on a number of fronts and there has been fighting around the capital Kyiv. There had been hopes that diplomatic moves could avert a military response, but these hopes were shattered as the Russians attacked while the UN Security Council was meeting on the Ukraine crisis.
The US and western European countries have promised to impose tougher sanctions on Russia, after slapping Moscow with limited sanctions barely 24 hours ago. The West could target Russian banks and cut them off the global financial network, and also impose export control rules which would prevent Russia from importing smart phones and other key products.
The spectre of the biggest war on European soil since 1945 has sent the financial markets sharply lower, as investors flee risk and look for safety. This has also weighed on the Australian dollar, which is sensitive to risk sentiment.
Australia CAPEX underperforms
Australian business investment for Q4 rebounded with a gain of 1.1%, after a reading of -1.1% in Q3. This was well short of the consensus of 2.5%, suggesting that Q4 GDP will be smaller than expected. The economy continues to improve, as consumer spending and employment have been pointing upwards.
Australian wage growth edged higher in the fourth quarter, rising 2.3% YoY, just shy of the consensus of 2.4%. With the pace of wage growth lagging behind inflation, which is around 3.5%, the RBA can continue to preach patience, although the markets are more hawkish and have priced in five rate hikes this year.
AUD/USD Technical
- With AUD/USD falling sharply, 0.7242 has strengthened in resistance. Above, there is resistance at 0.7306
- There is support at 0.7100 and 0.7022
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