AUD Plunges Following Commodity Price Drops

The ongoing Russia-Ukraine conflict has caused a hike in the price of essential commodities like energy and agricultural products. Being one of the largest exporters of energy, Australia had much to profit from this new price action of the commodities. However, things seem to take an unexpected turn for the AUD, with prices being affected by the negative risk sentiment in the market.

It has only been a week since the AUD reached a new height at $0.7441. This rise was fueled by the soaring commodity prices, which have lasted for nearly three weeks now. Unfortunately for the AUD, the commodity prices are slowly retreating to their original positions. Particularly, the energy sector has just witnessed a steep fall that brought the per-barrel price to $100. This could prove problematic for the AUD considering the price of a barrel was at $130 just last week. 

Along with the energy sector, other commodities, including industrial metals, precious metals, and agricultural products, have also experienced a significant fall. However, these are not as steep as energy as per the new reports. The weekly fall combined with a negative risk sentiment has also pushed the AUD down on the Chart and brought the coin to the $0.72 range. Although this dip resembles the currency’s movement last November, it does not necessarily mean the start of bearish sentiment. Furthermore, this dip could provide investors with an entry into the market according to the opinion of most Australian fx brokers.

The Reserve Bank of Australia has released the minutes for its recent meeting following this fall. According to experts, the minutes contained nothing that could have surprised the investors. Nonetheless, the members of the RBA seem to have recognized a brewing condition in the labor market. The labor market is reportedly facing the tightest position since 2008. With the plans to create 37,000 new jobs, the Australian government preserves the positive outlook and brings the unemployment rate to 4.1%. This could potentially set the momentum for the AUD for April and May. Surprisingly, the minutes have no solution towards mitigating the current situation with the commodity prices.

The situation with the Ukrainian invasion has already had a high impact on the commodity supply lines. Moreover, Australia is not the only one to suffer from such an economic crisis as China, too, is pushed to take measures against it. On top of everything, China has also reported a new wave of the coronavirus in which more than 3,500 people were affected in a single day. Although the impacts of these situations have not been significant, they could have initiated the negative price sentiment in the market that brought the commodity prices down.