The Australian and New Zealand dollars held firm on Friday after surprisingly soft economic data out of the United States stirred talk the all-important payrolls report might also underwhelm.mThe Australian dollar was steady at $0.7544, after rising around half a cent overnight, though that merely lifted it back to where it ended the previous week.
Its US counterpart took a knock after the closely-watched ISM survey of manufacturing showed its index of activity sank to 49.4 in August, from 52.6 in July, well under forecasts. The New Zealand dollar likewise held at $0.7284, after rising from as low as $0.7223 overnight. New Zealand government bonds eased, sending yields up between 2.5 and 3 basis points.
Australian government bond futures were a shade lower as everyone waited on the US jobs numbers. The three-year bond contract eased 2 ticks to 98.580, while the 10-year contract dipped a tick to 98.1400. The survey's employment index also declined and fed speculation the payrolls report due later on Friday could miss expectations that 180,000 new jobs were created in August.
A soft outcome would only reinforce market wagers that the Federal Reserve will not be able to hike rates at its meeting later this month given the absence of immediate inflation pressure. "The worry for some Fed officials remains an absence of a generalised pickup in inflation," wrote ANZ analysts in a note. "Thus a relatively large (payrolls) outturn relative to expectations, along with more evidence of a pickup in wages, is probably needed to get the market thinking of a near-term hike from the Fed." Domestic economic news was again upbeat with building work done jumping a hefty 5.5 percent in the June quarter, on top of an already outsized 5.7 percent rise in the March quarter.