Australia, NZ dollars slip on mixed signals over Gulf peace deal
- The kiwi was 0.05% lower to $0.5871 after edging up 0.1% overnight to as high as $0.5887
SYDNEY: The Australian and New Zealand dollars slipped on Friday as investors digested conflicting signals on a peace deal in the Gulf, which failed to offer clarity on when the Strait of Hormuz might reopen.
The Aussie slipped 0.1% to $0.7141, having bounced off an intraday low of 71 cents overnight on hopes for a peace deal in the Middle East.
That helped it recoup the losses from a soft jobs report that had markets reduce the chance of a fourth rate hike.
The kiwi was 0.05% lower to $0.5871 after edging up 0.1% overnight to as high as $0.5887.
Near-term resistance is around 59 cents, with support around $0.5816. US Secretary of State Marco Rubio said there had been “some good signs” in talks with Tehran, but Iran’s Supreme Leader said the country’s near-weapons-grade uranium should not be sent abroad. Oil prices whipsawed, as did risk appetite.
Reactions in currency markets were more muted, but weighing on the Aussie was also a narrowing in its interest rate advantage as yields offshore have spiked by more than they have at home.
After the soft jobs data on Thursday, the spread between Australian 10-year debt and US paper has shrunk to the smallest gap since November last year at 35 basis points.
“If the results for April are confirmed in coming months, markets may take out pricing for a fourth hike, weighing on AUD across the board,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
The Reserve Bank of Australia has hiked interest rates three times this year to 4.35% to fully reverse the amount of policy easing made in 2025, although a hike next month is only about 11% priced after the central bank said it now saw space to watch how the US-Israeli war on Iran plays out.
A rise in August is seen as a coin toss and there are 24 basis points of tightening priced in this year, or about one rate hike.
Across the Tasman Sea, data showed New Zealand’s retail sales rose by a strong 0.9% in the first quarter, lifting the annual pace to 4.5%, the highest in two and a half years.
That showed little disruption from the conflict in the Middle East.
The Reserve Bank of New Zealand meets next Wednesday and is considered likely to hold rates at 2.25%, while discussing when to hike given the inflationary pulse from energy costs.
Markets imply around an 80% chance of an increase in July so are vulnerable to any dovish tilt from the RBNZ.
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