Aussie steady as Iran talks conclude; all eyes on inflation, jobs data

SYDNEY: The Australian and New Zealand dollars steadied on Monday as US-Iran talks ended with signs of progress, while investors awaited Aussie inflation and employment data to see if the central bank could be finished raising rates.

The Aussie was flat at $0.7018, having slipped 0.3% last week to record a third week of declines. Resistance looks tough around $0.7088, while a break of $0.6979 would risk a retreat toward $0.6834.

The kiwi dollar was also little changed at $0.5734 after falling 1.6% last week to hit a three-month low of $0.5724.

The next bear target is $0.5681.

The two currencies have struggled as a hawkish swerve from the Federal Reserve has seen markets price in 40 basis points of tightening this year and shrunk their yield premium over Treasuries, although the 14-point peace deal in the Middle East has cushioned some of the blow.

The first round of talks between the US and Iran in Switzerland ended on Monday.

A joint statement from Qatar and Pakistan said progress was made on a roadmap to reach a final deal, helping to calm fear that the process was breaking down.

In Australia, all eyes are on monthly inflation and employment data due on Wednesday and Thursday.

A Reuters poll forecast that headline inflation picked up to 4.4% in May from 4.2% a month earlier, with the core measure edging up to 3.5% from 3.4%, both well above the central bank’s target band of 2% to 3%.

That will likely keep policymakers wary. Deputy Governor Andrew Hauser is expected to speak on Wednesday and is certain to be asked about the inflation outlook.

Any downside surprise could see markets pare back bets of another rate hike this year, which is currently priced at around 65%.

“While there is a path where the RBA doesn’t hike further, the threshold to further hikes is likely to be low in our view,” said Lachlan Dynan, a macro strategist at Deutsche Bank.

“Apart from the more obvious - higher-than-expected inflation - it’s plausible that if growth and the labour market simply don’t slow as much as the RBA expects in the near term, risks of further tightening should elevate.”

For the jobs data on Thursday, forecasts are centered on a rise of 25,000 net jobs for May, while the unemployment rate likely dipped to 4.4% after hitting a 4-1/2-year high of 4.5% last month. Risks are, however, on the downside given the three rate hikes this year.