Australia, NZ dollars locked in limbo, ponder RBA policy scenarios
- Markets have spent all week hanging on the May payrolls report and the outcome will likely unleash major moves no matter what it reveals.
SYDNEY: The Australian and New Zealand dollars were locked in limbo on Thursday as the world waited on US jobs figures to clarify the outlook for global interest rates, with another batch of upbeat domestic data unable to compete for attention.
Markets have spent all week hanging on the May payrolls report and the outcome will likely unleash major moves no matter what it reveals.
That left the Aussie sidelined at $0.7744, snugly within the week's range of $0.7702 to $0.7774. Indeed, this looked set to be the 17th straight session where it closed with a $0.77 handle.
The kiwi was stuck at $0.7227, having spent the week so far wandering between $0.7210 and $0.7288. It needs to clear the recent three-month peak of $0.7316 to break the deadlock.
Australian data was robust with retail sales up 1.1% in April and the trade surplus swelling to A$8.3 billion ($6.43 billion) on rising exports of coal and iron ore.
Yet the economic recovery has already been baked into market expectations and did little to resolve whether, and how, the Reserve Bank of Australia (RBA) would start tapering next month.
The bank will decide at its July 6 meeting whether to extend its yield curve target from April 2024 to November 2024 and whether to launch a third A$100 billion round of bond buying.
It underlined the importance of the meeting late Wednesday by announcing that RBA Governor Philip Lowe would give a rare news conference afterward.
Most analysts assume the central bank will not want to commit to keeping rates at 0.1% right out to the end of 2024, so will not roll over its bond yield target.
They are less sure about the bond buying plan, with some calling for another A$100 billion, a smaller programme of perhaps $50 billion or a shift to open-ended weekly purchases.
Most doubt it would end bond buying altogether, in part because that would likely send the Aussie higher and lift borrowing costs across the economy.
Alan Oster, chief economist at NAB, expects a new programme worth A$75 billion over six months.
"The Bank will likely stress that slowing the rate of purchases is not a tightening of policy - it's a reduction in the amount of new policy support being provided," he said.
"We expect monetary policy settings to remain exceptionally easy - with the cash rate to remain unchanged until 2024."
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