SYDNEY: The Australian and New Zealand dollars marked time on Wednesday ahead of a key US inflation reading where a high result could speed up the pace of US rate hikes and roil risk sentiment globally.
The Aussie was idling at $0.6959, having shied away from resistance around $0.7000 in very thin trading. Support lies around $0.6950 and $0.6870.
The kiwi dollar was flat at $0.6286, sandwiched between support at $0.6214 and resistance around $0.6315.
There was no domestic data on Wednesday to distract from the US inflation vigil, with analysts expecting some pullback in headline consumer prices, but a continued rise in the core rate.
“Core CPI inflation likely remains strong and supports the case for the Federal Reserve to take the Funds rate into restrictive settings,” a Carol Kong, a senior currency strategist at CBA.
Australia, NZ dollars hold gains, data offers mixed message
“We expect the Fed to raise rates by 50bp at each of the remaining meetings this year before pausing, but a strong CPI release could raise the risk of a 75bp hike in September,” she added. “A hawkish re-pricing of rate expectations tonight could help pull AUD/USD down below $0.6900.”
Markets remain split on whether the Reserve Bank of Australia (RBA) will hike by a quarter- or half-point at its next policy meeting in September, having already lifted rates by 175 basis points since May to 1.85%.
A super-tight labour market and survey evidence of rising wages and business costs argue for a larger move, while falling house prices and dismal consumer confidence lean toward a slowdown in tightening.
The Reserve Bank of New Zealand is considered much more certain to hike by 50 basis points to 3% at its meeting next week, given how sharply wages have picked up.
Analysts also suspect it will stick with projections for rates to peak near 4% next year, and for cuts to follow late in 2024.
Comments
Comments are closed.