SYDNEY: The Australian and New Zealand dollars were on hold on Wednesday awaiting US inflation figures that could affect the pace of policy easing there, while both currencies continued to lose ground to the safe-haven Japanese yen.
The Aussie was flat at $0.6656, having barely moved overnight.
Resistance lay at $0.6668 and $0.6767, with support at the 200-day moving average at $0.6617. It also hit a one-month low of 94.10 yen as investors scaled back on carry trades.
The kiwi dollar steadied at $0.6152, having found support at $0.6125.
Resistance comes in at $0.6183 and $0.6236. Both of the resource-heavy currencies were weighed by weakness in commodity prices as oil sank to its lowest in three years amid concerns over Chinese demand.
The next test will be US price data, where a soft number is needed to support the case for an outsized rate cut from the Federal Reserve next week.
Markets assume an aggressive Fed cut would put more pressure on the Reserve Bank of Australia (RBA) to ease, which it has said is unlikely until next year.
Swaps imply around a 32% chance of a quarter-point cut in November and 78% for December.
Some 103 basis points of easing is priced in by the end of 2025, compared to 258 basis points for the Fed.
Gareth Aird, head of Australian economics at CBA, argues the RBA could move as early as November should jobs data due next week show the unemployment rate rising to 4.3% as he expects.
“Another lift in the unemployment rate will leave us more comfortable with our non-consensus call for the RBA to commence an easing cycle in Q4,” said Aird.
Australia, NZ dollars steady after selling, bond rally stalls
“If we see such an outcome we expect the RBA will soften its hawkish rhetoric at the September Board meeting.”
“We expect around 125bp of policy easing by the end of 2025 that would take the cash rate to 3.10%.”
The Reserve Bank of New Zealand (RBNZ) has already moved and is considered certain to cut in October and November, with a chance one of those will be 50 basis points.
Markets currently see the 5.25% cash rate bottoming out at 3.0% late next year.
“If the RBNZ wants to remove the restrictiveness of interest rates, they need to go back to a neutral which is estimated to be around 2.75%,” said Jarrod Kerr, chief economist at Kiwibank.
“We think they’ll need to go a little below to get things moving, so we expect to see twelve 25bp cuts, 300bps in total.”
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