SYDNEY: The Australian and New Zealand dollars were looking to end a wild week with solid gains on Friday as US recession worries waned for a moment, allowing risk assets to make a comeback.
An unexpectedly sharp drop in US jobless claims was enough to see Wall Street bounce and the Nikkei extend its rally from Monday’s dizzying decline, pulling the safe-haven yen down in the process.
That helped the Aussie steady at $0.6589, giving it a gain of 1.2% for the week and putting it comfortably above Monday’s $0.6349 low.
A break of the 200-day moving average at $0.6598 would open the way for a return to $0.6705.
It was also up 1.8% on the yen for the week at 97.08 , far away from a trough of 90.35.
The kiwi dollar was 0.8% firmer for the week at $0.6005 , again some distance from its low of $0.5849. Resistance lies at $0.6025 and $0.6098.
The Aussie was underpinned by surprisingly hawkish guidance from the Reserve Bank of Australia (RBA) this week as Governor Michele Bullock all but ruled out a rate cut for the remainder of this year.
Markets now imply just a 46% chance of a cut by November, compared to 88% at the start of the week, though they are still wagering on a move in December.
Australia, NZ dollars jump on yen as BOJ turns cautious
Of the four major local banks, CBA continues to tip a cut in November, while ANZ and Westpac are going for February and NAB for May.
“Our overall message is that we believe rate relief is required to generate a meaningful lift in consumer spending that would propel GDP growth to a trend-like pace,” said Gareth Aird, head of Australian economics at CBA.
“And trend-like economic growth will be needed to keep the unemployment rate from rising further in 2025,” he added.
“We believe monetary policy will need to slowly move away from its restrictive setting in the not too distant future if full employment is to be retained.”
Market bets on the Reserve Bank of New Zealand (RBNZ) have gone entirely the other way after a drop in inflation expectations stoked speculation of a cut next week.
The central bank meets on Aug. 14 and swaps imply an 81% probability it will cut the 5.5% cash rate by 25 basis points.
Markets are pricing in 92 basis points of easing this year and another 148 basis points in 2025.
A Reuters poll of 31 analysts, found 12 expected a cut next week with the rest tipping no move.
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