Australian wage growth expected to rise
Inflation continues to be a hot topic in Australia, and wage growth for February will be released early on Wednesday. Wage growth is expected to have risen 0.7% q/q, up from 0.6% in January. It should be noted that the RBA forecasted a 0.7% gain in their most recent monetary policy statement, so a print above 0.7% will add to the pressure on the RBA to raise rates. The central bank has hinted that it could raise rates before the end of the year, but the markets are projecting aggressive RBA, with a hike in June followed by four more hikes this year.
The Federal Reserve is widely expected to raise rates at its March meeting. The most likely scenario is a traditional hike of 25 basis points, but traders shouldn’t rule out a 50-bps move. On Monday, Fed Governor Michelle Bowman suggested she was open to a 50-bps move if it was warranted by the economic data. At the same time, if the Ukraine crisis deteriorates further, the Fed could decide that the timing is not right to raise rates in the middle of a massive geopolitical crisis and could hold off until the conflict quiets down.
Russian President Putin upped the ante in the dangerous standoff between the West and Moscow. Putin announced that he would recognise two breakaway regions in Ukraine controlled by pro-Russian separatists. This was quickly followed by Russia sending “peacekeepers” into those areas, which means Russian soldiers and weapons are being moved into eastern Ukraine. The US and UK responded by declaring they would slap Moscow with sanctions and Germany has suspended certification of the Nord Stream 2 pipeline, which is supposed to supply Germany with Russian natural gas. Still, despite the escalation in the crisis, investors have not run for the hills looking for safe-havens and the Australian dollar has posted strong gains today.
- AUD/USD is putting strong pressure on resistance at 0.7242. Above, there is resistance at 0.7306
- There is support at 0.7100 and 0.7022
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