Australian, NZ dollars bounce from multi-month lows; local data taken in stride

SYDNEY: The Australian and New Zealand dollars bounced from multi-month lows on Tuesday while reacting little to local data that showed the pulse of Australian consumers slowing in the face of accelerating inflation and rising interest rates.

The Aussie was hovering at $0.6748, having falling as far as $0.6698 overnight - the lowest since Jan. 4 - before bouncing back to finish the session 0.2% higher.

It has support now at the retracement level of $0.6674. The kiwi dollar was flat at $0.6168 after tumbling as low as $0.6132 overnight, the lowest since late November, before recouping all of the losses.

Data on Tuesday showed Australian retail sales rebounded in January after a surprise plunge in December, though the underlining pulse was slowing.

The figures did not generate much market reaction, with futures still wagering on further interest rate hikes and hovering toward 4.39%, after the central bank flagged at least two more hikes earlier this month - a hawkish tilt that surprised many market watchers.

Figures for gross domestic product (GDP) are due on Wednesday and should show the economy grew by a solid 0.7% in the December quarter, and 2.7% for the year, driven by a sizeable contribution from international trade as resource exports boomed.

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Traders are now shifting attention to monthly consumer price index (CPI) data on Wednesday, which is widely expected to show consumer inflation eased slightly to 7.9% in January, from 8.4% the previous month.

“Despite all the caveats on the relatively new monthly CPI series, the Aussie could well react to any surprise,” said Sean Callow, senior currency strategist at Westpac.

“Should the global mood remain sour, AUD/USD could test its 2023 year-to-date low of 0.6688 but as always, risks of surprises lie in both directions.” Bonds were steady.

The yield on three-year Australia government bonds was largely unchanged at 3.589%, while 10-year bond yields were stable at 3.86%.