Australia, NZ dollars edge higher with much riding on US CPI

SYDNEY: The Australian and New Zealand dollars edged higher on Thursday as markets wagered coming US data would confirm a cooling in inflation, while Australia boasted a surprisingly large trade surplus as imports declined.

The Aussie added 0.2% to $0.6916, and remained within striking distance of its recent five-month peak of $0.6950.

Further resistance lies at an August top of $0.7009, with support at the 200-day moving average around $0.6834.

The kiwi dollar was a fraction firmer at $0.6372, just off a recent one-month top of $0.6411.

Its bull target is a high from December at $0.6513. Local data highlighted how Australia continued to benefit from being a net exporter of resources when commodity prices were still relatively high.

The country’s trade surplus climbed to A$13.2 billion ($9.13 billion) in November, far above forecasts for a pullback to A$10.5 billion.

Australia, NZ dollars pause near highs, momentum still bullish

That brought the rolling 12-month surplus to a hefty A$135 billion, net inflows of cash that provide fundamental support to the Aussie.

Marcel Thieliant, an economist at Capital Economics, noted that it looked likely export prices had dipped in the fourth quarter while import prices were still rising.

Another solid surplus for December would thus imply net exports made a substantial contribution to economic growth, perhaps as much as 1.7 percentage points.

“This would be one of the largest positive contributions on record and we doubt that it will be quite as large, but net trade is one reason to think that Q4 GDP growth will have held up well,” said Thieliant.

Globally, the crunch data of the day will be U.S consumer prices with analysts looking for headline inflation to slow to an annual 6.5% and core to 5.7%.

Investors seem to be betting on even lower numbers with Treasuries having rallied hard in the last couple of weeks.

Australian bonds have gone along for the ride with 10-year yields falling 42 basis points over the past two weeks to stand at 3.62%.

Any upside surprise on inflation would thus risk a reversal in bonds globally and likely a bounce in the US dollar.