SYDNEY: The Australian and New Zealand dollars nursed painful weekly losses on Friday after a run of soft domestic data, while markets awaited a US jobs report that could decide whether interest rates there are cut this month.
The risk for the Antipodeans is that a strong payrolls report materially lessens the chance of a rate cut and sends the US dollar sharply higher.
Equally, a soft reading would squeeze dollar long positions and give the Aussie a reprieve.
It has shed 1.1% so far this week to stand at $0.6446, just off a four-month low of $0.6399.
Resistance lies around $0.6475 and $0.6527, with major support at the August trough of $0.6349.
The kiwi dollar eased further to $0.5878, bringing losses for the week so far to 0.8%. Resistance comes in at $0.5928, with support layered at $0.5830 and $0.5797.
At home, data this week showing the Australian economy barely grew in the third quarter led markets to narrow the odds of an earlier rate cut from the Reserve Bank of Australia (RBA).
The central bank meets on Dec. 10 and is considered certain to hold rates at 4.35%, as it has done all year, but might choose to soften its tone given its forecasts for economic growth and consumption now look too optimistic.
“We suspect the Board will hold its neutral policy bias next week,” said Gareth Aird, head of Australian economics at Commonwealth Bank.
Australia dollar pressured by market push for earlier rate cuts
“But we are approaching the point at which the RBA could, and should, remove the line about not ruling anything in or out,” he added.
“The economic data is evolving in the direction that means the next move in rates will be down.”
He still looks for a first cut in February, while the other three major local banks have shifted to May. Markets this week swung dovish, pricing in a 47% chance of a cut in February up from 27% early in the week. An easing in April also shifted sharply higher to 92%.
Three-year bond futures climbed 8 ticks for the week to 96.170, while 10-year yields fell 10 basis points to hit a seven-week low at 4.195%.
The spread over Treasuries shrank to 8 basis points, from as much as 30 basis points in November.