SYDNEY: The Australian and New Zealand dollars finally found some traction on Friday as a bounce on Wall Street lifted risk sentiment, while bonds were again bowed to diminished expectations of early rate cuts.
The Aussie edged up 0.2% to $0.6587, having bounced from support around $0.6525 the previous session, but was still down 1.5% on the week so far.
Resistance lies just ahead at the 200-day moving average of $0.6594.
The kiwi dollar held at $0.6122 after finding support at $0.6088, but was down a hefty 1.9% on the week.
Bond futures extended their decline as solid US economic data and hawkish central bank comments forced investors to push out the likely timing of rate cuts globally.
The sea change completely overshadowed a soft Australian jobs report and left three-year bond futures down 22 ticks for the week at 96.13, the biggest drop since October.
The Reserve Bank of Australia (RBA) is now not seen easing until late in the year, rather than mid-year.
The chance of a June rate cut has dropped to 38%, with August at 60% and September at 87%.
“We believe RBA rate cuts will be required this year to prevent the unemployment rate from rising much above 4.5%, but our base case sees an easing cycle commencing in September,” said Gareth Aird, head of Australian economics at CBA.
Markets are more dovish on the Reserve Bank of New Zealand (RBNZ), implying an 80% chance of a first cut in May and a total of 85 basis points of easing this year.
Australia, NZ dollars hold near multi-week lows, jobs data disappoints
Crucial for the outlook will be data on consumer prices for the fourth quarter due next week, when annual inflation is expected to slow sharply.
Jarrod Kerr, chief economist at Kiwibank, expects headline CPI to drop to 4.6%, from 5.6%, and well under the RBNZ’s own forecast of 5.0%.
“We expect consumer prices rose a relatively soft 0.5% over the quarter,” he added. “Given the data to date, risks to the forecast appear tilted to the downside, and that’s great news for the RBNZ.”
The central bank was so concerned about inflation it actively considered hiking rates at its last policy meeting in late November.
The RBNZ has a chance to offer an update on its own outlook on Jan. 30, when its chief economist is live streaming a speech on changes to the global economy.
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