Australia, New Zealand dollars hold gains as local data run hot

SYDNEY: The Australian and New Zealand dollars consolidated recent gains on Wednesday, as a run of upbeat domestic data kept bond yields elevated, while optimism on the global outlook weighed on the US dollar.

The Aussie was just off a two-week top at $0.7730, well up from recent troughs at $0.7564 and $0.7583. It now faces resistance around $0.7785 and $0.7819.

The kiwi dollar paused at $0.7229, having enjoyed a solid bounce from last week's low of $0.7136. Resistance lies around $0.7255 and $0.7314.

At home, a survey of Australian consumer sentiment showed a bounce in February, after a setback in January when partial lockdowns in some cities spooked households.

Bank data on card spending suggests consumers had still been busy shopping in January, with NAB estimating retail sales could have climbed 1.5% compared to December.

"It is fair to say that these results further underline our view that the Australian economy starts 2021 in an enviably strong position, particularly given global events," said NAB chief economist, Alan Oster.

The Reserve Bank of Australia (RBA) wants the out performance to continue having just projected no rate hikes until 2024 at the earliest.

Three-year yields are pinned at 0.12% while 10-year yields stood at 1.22%, keeping the yield curve step at 110 basis points.

In New Zealand markets, a run of strong economic data and a boom in housing have seen a move to price in rate hikes from the Reserve Bank of New Zealand (RBNZ) as early as 2022.

The RBNZ's own survey of inflation expectations revealed a marked pick-up in the one-year outlook to 1.73%, while the two-year forecast climbed to 1.89% and near the middle of the central bank's 1-3% target band.

All of which lifted yields on 10-year bonds to their highest since last March at 1.45%, a rise of 40 basis points in just nine sessions.

Speculators are now wagering the RBNZ will take a hawkish tone at their next policy meeting on Feb. 24.

"They will surely acknowledge the stronger-than-expected economy," said Imre Speizer, head of NZ market strategy at Westpac.

"NZD/USD has broken above its contracting range which started in early January and we now expect a rise to $0.7325 during the weeks ahead, targeting $0.7500 by April."