AUD/USD recovers towards 0.7150 as risk appetite improves, dovish RBA minutes shrugged off

• AUD/USD has recovered some ground on Tuesday and is now probing the 0.7150 level.
• The pair is getting a boost as risk appetite improves on easing geopolitical tensions, having shrugged off dovish RBA minutes.

The dovish tone to Tuesday’s RBA minutes release, which confirmed the view espoused at the last policy meeting that the central bank is in no rush to start tightening monetary policy settings, has failed to hobble the Aussie. Indeed, AUD/USD has been trading with a positive bias on Tuesday having found good buying interest upon dips towards the 0.7100 level, though for now, the pair remains capped by resistance in the 0.7150 area. At current levels in the 0.7140s, AUD/USD is about 0.25% stronger on the day, making the Aussie the second-best performing G10 currency on the day after the euro.

Risk appetite has improved on Tuesday with Russian government officials, including President Vladimir Putin, confirming that troops will be partially withdrawn from the Ukrainian border. Geopolitical tensions remain elevated and the risk of a new Russia/Ukraine conflict high, but generally speaking, risk-sensitive assets have been doing well, which partially explains AUD strength. The latest much hotter than expected US Producer Price Inflation figures, though strengthening the argument of more hawkish Fed members calling for a 50bps hike in March, did not impact FX markets much.

Looking ahead, AUD/USD will continue to focus on geopolitical developments amid as risks of an escalation of tensions between Russia and Ukraine over the latter’s breakaway Eastern provinces rise. Otherwise, there will also be plenty of US/Aussie data releases for traders to sink their teeth into. US Retail Sales and Fed minutes are due on Wednesday, Australian employment data, US weekly jobless claims and Philly Fed survey data plus Fed speak are due on Thursday and a further barrage of Fed speak is due Friday.