SYDNEY: The Australian and New Zealand dollars were again burdened by global risk aversion on Thursday as tensions in the Middle East simmered, while domestic jobs data proved too mixed to offer any support.
Bonds also took a beating as Treasuries extended their recent sell-off, sending Australian 10-year yields to the highest since mid-2011 at 4.76%.
The Aussie eased 0.3% to $0.6317, having already been dragged off a $0.6394 high the previous session as world equity markets slid. Major support now lies around $0.6287.
The kiwi dollar was near it lowest in 11 months at $0.5846, having shed 0.7% on Wednesday to breach support at $0.5860.
The kiwi has been struggling since a surprisingly low reading of domestic inflation lessened the chance of another hike in interest rates.
Something similar happened in Australia on Thursday as data showed employment rose just 6,700 in September when analysts had looked for an increase of 20,000 or more.
The jobless rate did fall further to 3.6%, though mainly because more people gave up looking for work.
That result might not be enough on its own to offset the Reserve Bank of Australia’s (RBA) concerns about inflation.
RBA Governor Michele Bullock on Wednesday warned there were signs inflation could prove sticky and the central bank was very alert to the risks.
“There is likely little in today’s data that moves the needle either way - there are nascent signs the labour market is slackening, but this is a slow process and the market remains very tight,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
“The RBA’s hawkish communications have increased the chances for a rate hike in November, and inflation data next week will be the key piece of evidence.”
Consumer price figures for the third quarter are due on Oct. 25 and analysts see a risk core inflation will rise by more than the RBA’s own forecast of 0.9%.
Tapas Strickland, head of market economics at NAB, expects core inflation to rise 1.1% and to show stubborn cost pressures in the service sector.
“In our view the RBA will be forced to revise up their inflation forecasts with risks no longer being centred in getting inflation back to target within the existing time frame without a further hike,” he argued.
“NAB expects the RBA to hike rates by 25 basis points in November to 4.35%.”
Futures currently show around a 26% chance of a hike at the Nov. 7 policy meeting.
Comments
Comments are closed.