SYDNEY: The Australian and New Zealand dollars gave back a little of their recent gains on Thursday as their US counterpart bounced from deep lows, while domestic data did nothing to challenge wagers of further rate cuts at home.
Closely-watched figures on Australian jobs showed a rebound of 32,200 in March, confirming a sharp drop in February had been a one-off, while unemployment stayed low at 4.1%.
That left markets still fully priced for the Reserve Bank of Australia to cut its 4.10% cash rate by 25 basis points at its next meeting in May, with some chance of 50 basis points given the darkening outlook for US and global growth.
“The enormous economic uncertainty generated by erratic changes to US trade policy will weigh heavily on firms’ investment and hiring decisions,” Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
Australia, NZ dollars sustain gains, China data lightens trade gloom
“Employment growth will slow, and now expect the unemployment rate will climb a little higher over this year,” he added.
“Nevertheless, the Australian economy is fortunate to be entering this episode in a strong position.”
Action in the currency markets was dominated by flows in the US dollar, which bounced modestly as speculators booked profits on hefty short positions.
The Aussie eased 0.2% in response to $0.6357, after hitting a one-month top of $0.6391 overnight.
It needs to clear major chart resistance in the $0.6390/6409 zone to keep the rally going toward $0.6500. The kiwi dollar dipped to $0.5910, and looked overbought having climbed for six sessions straight.
The next target is a $0.6037 peak from November. New Zealand data out Thursday showed consumer prices rose 0.9% in the first quarter, above forecasts of 0.7%, and nudging annual inflation up to 2.5%.
However, the upside surprise was largely due to a one-off change in education costs and key measures of core inflation all eased, with the trimmed mean slowing to 2.3%.
“The underlying trend in inflation is looking well contained, with measures of core inflation trending back,” said Satish Ranchhod, a senior economist at Westpac.
“Inflation is comfortably inside the RBNZ’s 1% to 3% target band, and we expect that it will remain there over the year ahead.”
Markets still fully expect the Reserve Bank of New Zealand to cut its 3.5% cash rate by 25 basis points in May, and lower it to 2.75% by year-end.
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