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SYDNEY: The Australian and New Zealand dollars consolidated hefty gains on Wednesday after enjoying their biggest rally in a year as investors wagered on future US rate cuts and pulled bond yields down globally.

They got further support as Chinese data on retail sales and industrial output topped forecasts, boding well for continued Chinese demand for commodities.

A soft report on US inflation led investors to price out almost any chance of another hike from the Federal Reserve and instead pencil in 100 basis points of easing for 2024.

That was a huge reprieve for the Antipodean currencies which had been heavily sold as a proxy for global rate risk.

A resulting wave of short covering left the Aussie at $0.6496, having climbed 2% on Tuesday and away from a low of $0.6340.

A major chart barrier lies at the November top of $0.6523 and a break would open the way to the 200-day moving average around $0.6599.

The kiwi dollar reached a four-week high of $0.6015 , after jumping 2.2% the previous session to clear resistance at $0.6000.

Australia, NZ dollars hunker down for US inflation test

The next barrier is a top from October at $0.6056. Bonds joined the rally, with three-year futures up 11 ticks at 95.810. Ten-year bond yields were down at 4.538%, from a high of 4.679% early in the week.

The gains were restrained a little by the lingering risk of another rate rise from the Reserve Bank of Australia (RBA), which is facing a more protracted struggle with inflation.

Data on wages out on Wednesday showed high inflation was feeding into pay deals, though annual growth of 4.0% was still well below levels seen in many other developed nations.

It was also much as expected by the Reserve Bank of Australia (RBA) when it raised interest rates last week to a 12-year top of 4.35%.

“With the bumper increase in award wages behind us, wage growth is sure to moderate anew,” said Abhijit Surya, an economist at Capital Economics.

“Union officials’ inflation expectations have been trending downwards, and fortnightly data on newly lodged agreements show that wage increases have eased since mid-September,” he added.

“All told, we’re sticking with our forecast that the RBA is done hiking rates.” Markets also doubted the wage data alone would trigger a further tightening and priced in just a 7% probability of a rise in December.

Futures also imply around a 50-50 chance the RBA is done for this cycle.

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