SYDNEY: The Australian and New Zealand dollars were under pressure on Friday as a souring in global risk appetite slugged growth-leveraged assets, knocking both currencies through major chart bulwarks. The Aussie was huddled at $0.7166, having shed 0.8% on Thursday to touch a two-week trough of $0.7146. The break of support at $0.7184 has turned the technical outlook bearish and risks a return to $0.7083, if not $0.6994.
The kiwi dollar stood at $0.6744, after also sinking 0.8% to as deep as $0.6733. Again, the loss of support at $0.6766 was bearish and risks a test of the December low at $0.6702. Equity and bond markets have been roiled by speculation that a US rate hike could come as early as March, while the spread of the Omicron variant has dimmed the outlook for economic growth.
After months of very low numbers, Australia has also seen an explosion in new coronavirus cases in the past few weeks which is hitting consumer sentiment and spending, particularly in the services sector. The resulting illness and the need for cases to isolate has hit supply distribution and emptied some shelves in supermarkets. The Woolworths chain estimates more than 20% of its distribution staff and 10% of its store staff are absent.
Analysts are starting to trim forecasts for household consumption this quarter, while the Reserve Bank of Australia’s (RBA) optimism about a rapid recovery is being sorely tested. That could argue against an early end to the RBA’s bond-buying programme in February and for an extension to May, though Capital Economics economist Marcel Thieliant noted supply shortages will also add to inflationary pressures. “Between fresh reports of panic buying and mounting supply shortages, consumer food prices may well jump further,” he said.
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