SYDNEY: The Australian and New Zealand dollars flatlined on Friday as investors shunned risk assets ahead of US jobs data and the presidential election, though the prospect of steady rates at home did offer the Aussie a sliver of support.
Signs of a pickup in Chinese factory activity also helped the mood a little, with the Caixin PMI rising to 50.3 in September.
The Aussie held at $0.6571, down 0.4% for the week but off a recent three-month low of $0.6534.
Support is down at $0.6470 with resistance around $0.6628.
The kiwi dollar was also ailing at $0.5965, just above a three-month trough of $0.5940.
It has support around $0.5912 with resistance at $0.6002. Both currencies had a rough October as surging Treasury yields lifted the US dollar and markets grew cautious heading into the presidential vote.
That overshadowed a strong performance by the Australian labour market that reinforced market expectations the Reserve Bank of Australia would not be cutting rates this year.
The central bank meets next week and is considered certain to hold at 4.35%, even as the Federal Reserve is expected to cut for a second time in three months.
“We continue to expect the RBA to hold the cash rate steady until a 25bp cut in February,” said Adam Boyton, head of Australian economics at ANZ.
However, he did think the RBA might move further toward a neutral stance in its statement, perhaps dropping a previous reference to policy needing to be “sufficiently restrictive.”
The central bank might also trim forecasts for economic growth and consumption given data on household spending had shown a surprisingly weak outcome over the third quarter.
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Markets are currently much more hawkish on the outlook, tipping just a 19% chance of a rate cut in December and 32% for a move in February.
A quarter-point easing is not fully priced until July next year.
“Our own central case is that the RBA does not cut until Q2 2025, with a shallow easing phase to follow,” said Paul Bloxham, head of Australian economics at HSBC.
“The risk is increasing that it takes even longer to cut or that the RBA misses the easing phase altogether.”
The outlook could not be more different than for the Reserve Bank of New Zealand, where markets are fully priced for a further cut of 50 basis points when it meets on Nov. 27.
The current 4.75% cash rate is seen at 3.82% by Christmas and around 3.09% at the end of next year.