Well with the holiday period come and gone, the markets are also starting to get over that holiday feel over not much movement and a few lazy days.
The Australian Dollar to US Dollar exchange rate has seen a very tight range in the past two weeks, sitting between 0.7185 and 0.7268 after we seen Monday open the week with a large drop of 1.17% to reach the low, however recover most of that on Tuesday.
Locally we are seeing a huge knock on effect from the borders opening and the Omicron variant of COVID-19 running rampant and putting huge pressure on many sectors, however outside of the Health sector, the retailers including cafe's and restaurants are also starting to be severely impacted with high number of staff having to be isolated after coming into contact with a positive case.
This will no doubt have a longer term impact when looking at the economic picture of retail sales as many businesses were hoping to see a record period when we were able to have all the cross border visitors spend locally.
On the US side, the FOMC minutes were released overnight and showed that most of the Fed members are in favour of rates increases "relatively soon" if the labor market conditions continue to improve. An 80% chance of an increase to US rates in March 2022 have been mentioned and expected to happen.
This leaves the AUD/USD in a precarious position, it could mean another run on the USD, and have the AUD back around the support levels of 0.71c, however with local US data which was positive this week, the markets did not move like you might expect, so a possible upward run to around 0.7350 could be possible.
Overall that still sits in a fairly tight range, and even with a move up, it's still not great if you're importing when 0.73 could the high we are hoping for. If you're looking ahead to get your pricing right for this year, work between 0.70-0.71c to give yourself some sort of buffer and if we do get back to those levels of 0.73+ then some sort of forward buy/hedge may be worth a look, and at leat give you some risk protection in these markets.
We are still going to see more and more uncertainty in the markets due to COVID, shipping issues, low exchange rates and volatility, so managing risk moving forward should be high on your plan.
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Current rates
AUD/USD - 0.7220
AUD/EUR - 0.6381
AUD/GBP - 0.5325
AUD/NZD - 1.0623
AUD/CNY - 4.5934
GBP/AUD - 1.8772
GBP/NZD - 1.9945
GBP/USD - 1.3553
EUR/USD - 1.1312