Australian, NZ dollars pause after relief rally, on track for weekly gains
- The Aussie was steady at $0.7161, after slipping 0.1% overnight to retreat from a four-year high of $0.7197 hit on Thursday
SYDNEY: The Australian and New Zealand dollars took a breather on Friday from their recent rally, but remained on track for solid weekly gains as optimism grew over a potential Middle East peace deal.
The Aussie was steady at $0.7161, after slipping 0.1% overnight to retreat from a four-year high of $0.7197 hit on Thursday, partly due to a technical rebound in the battered US dollar.
The Antipodean was still on track for a weekly gain of about 1.2%, its third consecutive rise, having rallied nearly 5% from its March low of $0.6834.
Sentiment was supported overnight by news that Israel and Lebanon had entered a 10-day ceasefire, alongside signs Washington could hold further talks with Iran.
The currency has also drawn support from expectations of another Reserve Bank of Australia rate hike next month to 4.35%, now priced at a 75% chance after solid job numbers signalled a resilient labour market.
The war-driven energy shock had economists at Goldman Sachs tipping for two more rate hikes from the RBA to 4.6%, from one before, and raising the odds of a recession to 25% from 11%.
“The global supply shock has knocked the RBA further off its strategy to walk a benign ‘narrow path’ that ‘preserves gains in the labour market’,” said Andrew Boak, an economist at Goldman Sachs.
“The Monetary Policy Board appears to now have a tolerance for a ‘rougher’ return to the inflation target - featuring weaker growth and employment.”
The New Zealand dollar edged 0.1% lower to $0.5883, extending a 0.4% overnight drop as it pulled back from a one-month peak of $0.5922. Still, the unit is up 0.8% for the week, marking a second weekly gain, with support seen around $0.5680.
Investors will watch New Zealand’s first-quarter inflation data, due next Tuesday, after its central bank warned of decisive action if inflation heats up due to the war.
However, the data should only capture some initial impact of the oil spike.
“We’re expecting a chunky 0.9% over the first quarter, keeping the annual rate at 3.1%,” said Jarrod Kerr, chief economist at Kiwibank.
“We hoped that 2026 would finally be the year where growth caught up with prices. Now, we are less optimistic.
We are currently weathering one of the biggest oil shocks in history, and a weak consumer is our biggest concern.“
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