AUD/USD moves to fresh highs for the day as commodities run higher

• AUD/USD bid as commodities run higher in the face of hawkish Fed.
• The Russian invasion of Ukraine puts upward pressure on commodities.

AUD/USD is making a fresh high in midday New York trade touching 0.7452 having travelled from a low of 0.7375 in risk-on markets.  The US dollar is giving back territory despite Federal Reserve Chair Jerome Powell putting the possibility of half-percentage-point interest rate hikes on the table.

Earlier in the day, the greenback saw its biggest one-day percentage gain since March 10 on Monday as the Fed opened the door for raising rates by more than 25 basis points at upcoming policy meetings in order to contain inflation.

''His tone was more hawkish than his post-FOMC press conference last week. Of course, a lot can happen between now and the May 3-4 meeting. Recall that a 50 bp hike at the March 15-16 meeting was over 80% priced in last month before it became clear that 25 bp was most likely,'' analysts at Brown Brothers Harriman said. 

Nevertheless, in the wake of Powell's comments, markets are anticipating that the central bank will raise interest rates by 50 basis points at both its May and June meetings. Nevertheless, investors were in a risk-on mood and US stocks rose and dented some of the safe-haven appeal of the greenback.

The Dow Jones Industrial Average rose 0.8% with the S&P 500 up by 1.13% and the Nasdaq Composite adding 1.85% while the US yields soar to multi-year highs by putting the possibility of the half-percentage-point rate hikes on the table. Two-year, five-year, 10-year and 30-year Treasury yields all stood at their highest levels since 2019.

Meanwhile, net AUD short positions have dropped sharply to their lowest levels since August 2021 while soaring commodity prices are offering the AUD support vs. the USD in the spot market. The Russian invasion of Ukraine is adding some serious upward pressure on commodities. Crude oil has surged higher on reports Europe was considering a ban on Russian oil as several European countries push for the fifth round of sanctions on Russia,.