SYDNEY: The Australian and New Zealand dollars nudged higher on Monday as their US counterpart took a step back, though the rapid spread of coronavirus in Australia was complicating the outlook for the economy and interest rates.
The Aussie stood at $0.7196, having bounced from a two-week trough of $0.7130 on Friday. It faces resistance around $0.7200 and a major barrier at $0.7276 that has held for several weeks now.
The kiwi dollar edged up to $0.6780 and away from last week's trough of $0.6733, but again faces stiff resistance at $0.6795 and $0.6835.
The US dollar ran into selling on Friday when the December payrolls number missed forecasts, though the rest of the report was strong enough to see markets actually narrow the odds on a March hike from the Federal Reserve.
Futures are also almost fully priced for a June rate rise from the Reserve Bank of Australia (RBA), even though the central bank has long argued that a move was unlikely until at least 2023.
Adding to the case for caution on tightening is the explosion in coronavirus cases in Australia to 100,000-plus a day, compared to just a couple of thousand a month ago.
The spread has put a chill on consumer sentiment with ANZ reporting spending on its cards hit the lowest since the Delta wave led to lockdowns in Sydney and Melbourne.
"Caution about being in public places is being compounded by staff shortages to stifle spending across dining, retail and travel," said Adelaide Timbrell, a senior economist at ANZ. "Indeed, total ANZ-observed spending in Sydney is at its lowest point since COVID began."
The latest Omicron wave is not expected to peak until late this month, around the time the RBA holds its first policy meeting of the year on Feb. 1.
That might argue for the bank to extend its bond buying campaign to May rather than ending it altogether in February as some analysts expect.
Much could depend on the outcome of the December jobs report on Jan. 20 and consumer prices for the fourth quarter on Jan. 25, where strong readings would support the case for a February end to bond purchases.
A February halt would encourage market speculation of a June rise in rates, while an extension to May would make a move as soon as June look less likely.
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