SYDNEY: The Australian and New Zealand dollars held on to recent gains on Thursday as domestic economic data proved to be not as dire as first feared and investors wagered US monetary policy was about to take an even more dovish shift.
Speculation is rife Federal Reserve Chair Jerome Powell will use a speech later Thursday to signal the central bank will soften its inflation target to allow policy to stay super-easy for longer, a potential drag on the US dollar.
The Aussie inched up to $0.7238 having risen for three days in a row and away from support in the $0.7136/50 zone. Major resistance lies at the August peak of $0.7275 and a break could spark a burst of buying from momentum funds.
The kiwi dollar was firm at $0.6626, after jumping 1.1% overnight, but faces resistance at $0.6655.
Futures for 10-year bonds added five ticks on Thursday to 99.0800, implying an yield of 0.92%. The three-year bond contract was a fraction firmer at 99.690.
Australian data showed business investment dropped 5.9% in the second quarter as coronavirus lockdowns hit demand, though that was a lot better than the forecast of a 8.4% fall.
Firms did scale back future spending plans, but again by not nearly as much as expected, thanks in part to the mining sector which is benefiting from strong Chinese demand.
“The upshot is that the outlook for capital spending isn’t as gloomy as one would expect in the current environment,” said Marcel Thieliant, an economist at Capital Economics. He now estimated gross domestic product likely fell by around 4.5% in the June quarter, from the previous quarter, up from a previous forecast of 6.5%. The GDP data is due next week.—Reuters
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