SYDNEY: The Australian and New Zealand dollars edged higher on Tuesday as a lack of negative news in banks helped lift riskier assets, while domestic data was subdued enough to support market wagers for a pause in Australian rate rises.
The Aussie added 0.4% to $0.6680, tracking gains in global share markets. Support lies at $0.6625 with resistance around $0.6695 and $0.6755.
The kiwi dollar firmed to $0.6219, but remains well short of last week’s top of $0.6309. Figures showed Australian retail sales rose a modest 0.2% in February, a touch higher than forecast but calming down after three months of wild swings.
Overall, nominal sales have been pretty flat for the past few months, which implies weakness in real spending given inflation is still very high.
This data series was cited by the Reserve Bank of Australia (RBA) as important for whether it decides to halt its 10-month tightening campaign in April.
“The tepid rise in retail sales in February all but locks in a contraction in sales volumes in Q1 and adds to the case for the RBA pausing its rate hiking cycle next week,” said Abhijit Surva, an economist at Capital Economics.
Markets currently only see around an 12% chance of a further rise in the 3.6% cash rate on April 4, with many investors wagering the central bank is done with hikes altogether.
Still, the better news on US banks did see futures scale back expectations for rate cuts from the Federal Reserve, and in turn the RBA.
Australian three-year bond futures slipped 10 ticks to 97.140, but are still up a huge 75 ticks for the month so far.
Australia, NZ dollars on defensive as bond yields keep sliding
Yields on 10-year paper edged up to 3.287%, but remain 24 basis points under Treasuries. Markets assume the hawkish Reserve Bank of New Zealand (RBNZ) will go ahead and lift its 4.75% cash rate by a quarter point when it meets on April 5.
They also see a good chance of a further move to 5.25%, but doubt rates will reach the 5.5% target projected by the RBNZ.
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