SYDNEY: The Australian and New Zealand dollars found a sliver of support on Thursday after three straight sessions of losses, with risks still mounting to the downside as investors aggressively wager on near-term cuts to interest rates.
Among the major Australian banks, NAB joined Westpac in shifting its call for the first cut from the Reserve Bank of Australia to February from May given surprisingly soft inflation data.
“The CPI confirms that inflation has moderated more quickly than the RBA expected and sets up a likely downward revision to the inflation profile,” said Alan Oster, group chief economist at NAB.
“This now makes February the most likely starting point for a gradual easing in interest rates.”
Market were well ahead, having priced in a 95% chance of a quarter point reduction in the 4.35% cash rate at the RBA’s next meeting on Feb. 18.
Yet investors are less dovish on the longer-term outlook seeing rates bottoming around 3.50% this year, while NAB looks for a terminal rate of 3.1% in February 2026.
Markets are confident the Reserve Bank of New Zealand will cut its 4.25% cash rate by 50 basis points when it meets on Feb. 19, and sees further easing to near 3.0% by year end.
In contrast, the US Federal Reserve paused its easing cycle on Wednesday and markets imply only two more cuts this year toward 3.85%.
Australian dollar slips as soft inflation stokes rate cut bets
Also not helping the trade-exposed Antipodean currencies, was talk the White House could impose tariffs on Canada and Mexico as early as Saturday.
Howard Lutnick, President Donald Trump’s nominee to run the Commerce Department, said on Wednesday that Canada and Mexico can avoid tariffs if they act swiftly to close their borders to fentanyl, but offered no details.
The Aussie is often used as a liquid proxy for global trade risks and would likely be sold should any tariffs be imposed.
The currency was stuck at $0.6235 on Thursday, having fallen to as low as $0.6208 overnight. Major resistance was up at $0.6330, with support around $0.6163 and $0.6129.
The kiwi dollar was flat at $0.5659, and off an overnight low of $0.5632.
Support is down at $0.5561 and resistance at the recent top of $0.5723.
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