SYDNEY: The Australian and New Zealand dollars stalled on Wednesday as a surprisingly soft reading on Chinese services activity took the steam out of an overnight rally and left major chart barriers untroubled.
The recent run of disappointing news on the Chinese economy continued with the Caixin/S&P Global services index easing to 53.9 in June from 57.1 in May, the lowest reading since January.
Sentiment was also soured by a report in the Global Times that China’s move to restrict the exports of two metals crucial for making some types of semiconductors and electric vehicles was a warning to the West.
Australian dollar slips as RBA skips on a rate rise
The news added to pressure on the kiwi from a hefty drop in milk prices in the latest global auction. Dairy is New Zealand’s single biggest export earner.
The Aussie faded to $0.6683, from a top of $0.6705, taking it away from resistance around $0.6720. The kiwi dollar flatlined at $0.6190, off a high of $0.6213 and just short of resistance around $0.6222.
The Aussie had still largely recovered from Tuesday’s decision by the Reserve Bank of Australia (RBA) not to raise its 4.1% cash rate, with many analysts assuming this was just a pause before a hike in August.
Key data on second-quarter consumer prices are due out later this month and are likely to show core inflation remains stubbornly high, particularly in services and rents.
Industry data out Wednesday also underlined the resilience of consumer demand with sales of new autos jumping 25% in June from a year earlier.
Andrew Boak, an economist at Goldman Sachs, noted the unemployment rate was still below where it was when the RBA started hiking in May last year while house prices had rebounded and were rising at an annualised pace of 15%.
“We continue to expect the RBA to hike to a peak rate of 4.85% in order to return inflation to target on a credible timeframe,” he said, tipping moves in August, November and December.
Markets are fully priced for one more hike to 4.35%, with some chance of another to 4.6%.
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