SYDNEY: The Australian and New Zealand dollars edged higher on Thursday as a well-flagged rise in US rates proved anticlimactic, though policy meetings in Europe and Japan still posed risks.
The Aussie added 0.2% to $0.6772, having seesawed between $0.6730 and $0.6793 overnight.
The kiwi dollar inched up to $0.6227, to test the top of the week’s $0.6158 to $0.6235 range.
With the Federal Reserve hike out of the way, markets are wagering it is done tightening and that will lessen pressure on other central banks to keep raising their rates.
The European Central Bank is also expected to hike later on Thursday, but again investors suspect that will be the last, while the Bank of Japan is seen keeping policy super-loose at its meeting on Friday. All of which has reinforced speculation the Reserve Bank of Australia (RBA) will hold rates at 4.1% when it meets on Aug. 1.
A surprisingly soft reading on domestic inflation has already seen markets scale back the chance of a hike to around 25%, half what it was at the start of the week.
The expected peak for rates has fallen to 4.30%, from 4.45%. The data were enough for NAB to abandon both its call for a rate rise next week and an expected peak of 4.6%.
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“The inflation picture suggests the risk remains of some further tightening in Australia in the next few months but that at the same time we are close to the peak in interest rates,” said NAB economist Ivan Colhoun.
Economists at CBA are sticking with their call for one last quarter-point rise next week, though they believe it could go either way, while ANZ recently dropped their forecasted hikes and now see rates on an extended hold.
Analysts at Westpac had seen two more rate increases, and have yet to change that call.
Among other analysts, Nomura now expects no more hikes. JPMorgan, AMP, Capital Economics, Barclays and HSBC see one more move, while Goldman Sachs tips a top of 4.6%.
“We acknowledge material risk that the RBA remains on hold in August, but lean slightly towards another hike given still elevated underlying/services inflation, the stronger-than-expected labour market, and the rapidly reflating housing market,” Goldman economist Andrew Boak said.
Australian retail sales data due Friday is likely to support the dovish camp as forecasts favour a flat outcome for June, after a surprisingly upbeat 0.7% gain in May.
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