The Australian dollar skidded to a four-month trough on Wednesday as a surprisingly weak reading on wages threatened to keep inflation, and thus interest rates, lower for even longer than currently priced in. The Aussie shed 0.6 percent to $0.7580, leaving behind chart support at $0.7625/30 and putting at risk the next technical bulwarks at $0.7570 and $0.7535. Against the euro, it struck its lowest point since mid-2016.
The sell-off came after data showed wages rose only 0.5 percent in the third quarter and 2.0 percent for the year, well short of forecasts of 0.7 percent and 2.2 percent, respectively. That augured ill for consumer spending and posed a challenge to the Reserve Bank of Australia (RBA) view that wages would ultimately pick up as the labour market tightened.
Australian government bond futures broke four sessions of losses to rebound sharply. The three-year contract added 6 ticks to 98.050, while the 10-year contract firmed 6.5 ticks to 97.3900. In New Zealand, the kiwi dollar was holding at $0.6872, having hit a two-week low of $0.6844 overnight. The currency has been pressured by wagers the country's new Labour government would loosen the Reserve Bank of New Zealand's strict inflation target.
New Zealand government bonds followed Australian debt higher in price, pushing yields as much as 5 basis points lower. "The soft result would come as a surprise to the market and the RBA, and portends a continuation of the subdued wages environment," said Westpac economist Simon Murray.
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