WELLINGTON/SYDNEY: The Australian and New Zealand dollars lost a little ground as soft US data and a recession in Spain pushed equities back and soured risk sentiment ahead of a likely rate cut from the Reserve Bank of Australia's on Tuesday.
* Aussie around $1.0429, from $1.0454 on Monday late local session. It has held largely within recent range, with support now seen at $1.0390 and resistance at $1.0475.
* The RBA is considered almost certain to cut by at least 25 bps, while markets imply a one-in-four chance of a half-point easing. That is one reason Australian debt futures have been stellar-performers of late.
* A cut of 50 bps would be a surprise and would likely see the Aussie gap lower, while a move of 25 bps is so fully priced it the currency could even edge higher.
* Focus then on the statement for any hint of whether the RBA would consider cutting again in June. Comments on outlook for inflation and growth at home, and on China also important.
* The three-year contract gained 0.01 points to 97.020, not far from the year's peak of 97.060. The 10-year contract was up 0.025 points at 96.405, a whisker away from an all-time high and triple top of 96.420.
* The kiwi also softer around $0.8185, from $0.8220 late Tuesday. Near term support seen around the 100-day MA at $0.8109, with resistance at $0.82584, an upper Bollinger band.
* Kiwi has been trapped in a three-cent range for as many months, and needs a significant catalyst to break out. Key events this week are Fonterra's dairy auction on Wednesday, and first-quarter job numbers on Thursday.
* On Tuesday, NZ wages and partial job data also due. In addition, Prime Minister John Key is expected to give a speech with more hints on the planned zero-growth budget this year.
* Risk trades pressured as Wall Street pulled back on signs of a slowdown in the US economy and a recession in Spain. Still, the CRB commodity index edged up 0.1 pct, with gold a touch higher while copper and oil lower.
* While data on US spending and business activity in the Midwest reinforces view of US recovery losing momentum, news of Spain slipping back into recession weighed on the euro.
* That sent the euro to A$1.2692 from A$1.2713 in late NY trade and to NZ$1.6179 from NZ$1.6187.
* Aussie dollar flat around NZ$1.2734 against the kiwi , not far from a one-month high of NZ$1.2780 struck last week.
* NZ government bond prices firmer early, in line with US Treasuries, with local yields about three bps lower.
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