It has turned into a rough outing for the Australian dollar and its commodity cousins.
AUD/USD is down 90 pips, or 1.2%, to 0.7201 and is trading at a session low.
The move lower has tracked the reversal in US equity market sentiment and ongoing grind higher in Treasury yields. Optimism about a ceasefire initially gave equities Equities Equities can be defined as stocks or shares in a company that investors can buy or sell. For example, when you buy a stock, you are purchasing equity, thereby becoming a partial owner of shares in a specific company or fund.Equities do not pay a fixed interest rate, and as such are not considered guaranteed income. Consequently, equity markets are often associated with risk.When a company issues bonds, it’s taking loans from buyers. When a company offers shares, on the other hand, it’s selling partial ownership in the company.Equities have become a popular form of investing. Despite their risk, there are many reasons for individuals investing in equities. Equity holders can also benefit through dividends, as these differ notably from capital gains or price differences in stocks you have purchased.Dividends reflect periodic payments made from a company to its shareholders. They’re taxed like long-term capital gains, which vary by country. Why are Equities so Popular?In the United States and many developed countries, equity markets are amongst the largest in terms of transactions, investors, and turnover, adding to their growing popularity in recent decades.The appeal of equities is the potential for high returns. Most portfolios feature some portion of equity exposure for growth, which as mentioned also carries a larger degree of risk.Equities are also popular with younger investors who can largely afford to take on higher levels of equity exposure, i.e. risk. As such, these individuals have more stocks in their portfolio because of their potential for returns over time. However, individuals looking to retire or rely on a more stabilized and risk-averse portfolio often reduce their equity exposure.This stance is hardly novel and can explain trading habits among many investors. For example, holders of retirement accounts typically will shift at least a portion of their investments from stocks to bonds or fixed-income as they get older. Equities can be defined as stocks or shares in a company that investors can buy or sell. For example, when you buy a stock, you are purchasing equity, thereby becoming a partial owner of shares in a specific company or fund.Equities do not pay a fixed interest rate, and as such are not considered guaranteed income. Consequently, equity markets are often associated with risk.When a company issues bonds, it’s taking loans from buyers. When a company offers shares, on the other hand, it’s selling partial ownership in the company.Equities have become a popular form of investing. Despite their risk, there are many reasons for individuals investing in equities. Equity holders can also benefit through dividends, as these differ notably from capital gains or price differences in stocks you have purchased.Dividends reflect periodic payments made from a company to its shareholders. They’re taxed like long-term capital gains, which vary by country. Why are Equities so Popular?In the United States and many developed countries, equity markets are amongst the largest in terms of transactions, investors, and turnover, adding to their growing popularity in recent decades.The appeal of equities is the potential for high returns. Most portfolios feature some portion of equity exposure for growth, which as mentioned also carries a larger degree of risk.Equities are also popular with younger investors who can largely afford to take on higher levels of equity exposure, i.e. risk. As such, these individuals have more stocks in their portfolio because of their potential for returns over time. However, individuals looking to retire or rely on a more stabilized and risk-averse portfolio often reduce their equity exposure.This stance is hardly novel and can explain trading habits among many investors. For example, holders of retirement accounts typically will shift at least a portion of their investments from stocks to bonds or fixed-income as they get older. Read this Term a boost and weighed on commodities Commodities Commodities are assets that are either naturally grown or occurring in the environment. Most commonly this includes precious metals such as gold, silver, and palladium.Beyond metals, commodities can also focus on agricultural or industrial goods that are central to manufacturing or other sectors. This includes crude oil, copper, wheat, and others.Relative to other assets, commodities are an extremely complex form of investment, with many similarities and differences to existing products.Commodities can be traded on exchanges where investors work as a team to purchase or trade products in an attempt to generate profit from the fluctuation of market prices or because they need that particular product.Additionally, commodities are often traded through the use of exchange-traded-funds (ETFs) to give exposure to investors.How to Trade CommoditiesCommodities trading is not reserved only for institutional traders but also ordinary retail ones as wellNearly all retail brokers carry some offering of commodities, giving investors access to these assets.Investors, just like companies or other investment institutions, are able to make a profit from daily changes in commodity prices. There are several methods that investors can use to trade commodities. Commodities can be traded in futures – these are contracts that direct the purchase or trade of a commodity at a certain price. Futures trading can be particularly risky and is usually reserved for more advanced traders given the complexity of these trades.In addition, commodities can also be traded with options – this means the commodity is purchased or traded at a particular date and price.Commodities are also commonly traded with leverage, not unlike other assets, which can result in large profits or losses due to volatility in markets. Commodities are assets that are either naturally grown or occurring in the environment. Most commonly this includes precious metals such as gold, silver, and palladium.Beyond metals, commodities can also focus on agricultural or industrial goods that are central to manufacturing or other sectors. This includes crude oil, copper, wheat, and others.Relative to other assets, commodities are an extremely complex form of investment, with many similarities and differences to existing products.Commodities can be traded on exchanges where investors work as a team to purchase or trade products in an attempt to generate profit from the fluctuation of market prices or because they need that particular product.Additionally, commodities are often traded through the use of exchange-traded-funds (ETFs) to give exposure to investors.How to Trade CommoditiesCommodities trading is not reserved only for institutional traders but also ordinary retail ones as wellNearly all retail brokers carry some offering of commodities, giving investors access to these assets.Investors, just like companies or other investment institutions, are able to make a profit from daily changes in commodity prices. There are several methods that investors can use to trade commodities. Commodities can be traded in futures – these are contracts that direct the purchase or trade of a commodity at a certain price. Futures trading can be particularly risky and is usually reserved for more advanced traders given the complexity of these trades.In addition, commodities can also be traded with options – this means the commodity is purchased or traded at a particular date and price.Commodities are also commonly traded with leverage, not unlike other assets, which can result in large profits or losses due to volatility in markets. Read this Term that were bid up on sanctions. Now AUD is getting hit from both sides as ceasefire hopes continue while tech stocks continue to wilt.
There's a growing fear that an inflation shock has arrived that has ensured global central banks are behind the curve. It might mean a faster pace of hikes and/or hiking into a recession.
On the commodity front, there's an early sense that momentum for sanctions is near a peak. There's also evidence that Russian commodities will find there way to other parts of the world.
Ultimately, AUD and the other commodity currencies are proxies for global growth and the picture is worsening daily.
