SYDNEY: The Australian and New Zealand dollars won a reprieve from selling pressure on Friday after a soft report on US jobless claims prompted a knee-jerk dip in their US counterpart.
Analysts suspected the jump in claims was partly a statistical blip, but it was still enough to nudge down Treasury yields and the dollar.
That helped lift the Aussie to $0.6612, up from a low of $0.6566 hit early on Thursday.
It still remains short of major resistance at $0.6650, which has constrained the currency since January.
The kiwi dollar stood at $0.6035, having bounced 0.5% overnight.
Support lies around $0.5982, with resistance at the recent top of $0.6050.
The Aussie also notched a four-month high on sterling after the Bank of England (BoE) opened the door to rate cuts as early as June and noted policy might ultimately have to be eased even more than markets were pricing in.
That saw the Aussie reach 0.5287 pounds, up from 0.5175 at the start of May.
Markets now imply a 50-50 chance of a BoE cut in June and are almost fully priced for August.
Australia, NZ currencies hit one-month lows on yen, subdued against US dollar
They also imply an 88% chance the European Central Bank will ease in June, while the Federal Reserve is seen moving in September.
For Australia, stubborn domestic inflation has led the market to price out any prospect of a cut this year, and even a 27% chance the next move will be up.
The head of the Reserve Bank of Australia (RBA) this week said she hoped rates would not have to rise again, but offered scant prospect of any easing either.
One constraint for the central bank is that fiscal policy is set to be modestly expansive in the coming year, largely due to a sizable cut in income taxes slated for July 1.
The Labor government releases its 2024/25 budget next week and is under pressure to offer more cost of living relief, likely in the form of energy rebates.
“Income tax cuts will boost consumer spending and underpinning inflation,” said Paul Bloxham, head of Australian economics at HSBC. “In addition, with a Federal election expected by mid-2025, the temptation to spend more will be high.”
“We expect that budget policy will boost growth but also add to inflation in 2024/25,” he added.
“Fiscal policy may be one more reason for the RBA to keep its cash rate higher for longer.”
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