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SYDNEY: The Australian and New Zealand dollars were consolidating gains on Thursday after a surprisingly soft reading on core US inflation revived the chance of earlier rate cuts there, while upbeat jobs data at home offered added support.

Both were off their peaks after running into profit-taking, but the Aussie was still up 1% for the week.

It was last trading at $0.6650, having briefly reached as far as $0.6705 overnight.

That was well away from last week’s low of $0.6576, though a break of the May peak at $0.6714 is needed to extend the run.

The kiwi dollar stood at $0.6172, after climbing 0.6% overnight to touch a five-month top of $0.6222.

A sustained breach of $0.6215 would be technically bullish.

Notably, the kiwi also jumped to a fresh 17-year peak on the Japanese yen at 97.31 yen as attractive interest rate differentials fuelled carry trades.

“It could extend slightly further to 97.80, which would be the highest since 1986, the year after the NZD was floated,” said Imre Speizer, an analyst at Westpac.

“That said, it is stretched and vulnerable to a major reversal,” he added, noting the Bank of Japan was meeting on Friday and could announce a reduction in its bond buying campaign.

Australia, NZ dollars brace for US rate outlook to make waves

Australian data showed employment topped forecasts with a rise of 39,700 in May, while the jobless rate fell back to 4.0% as expected.

The market reaction was muted as, while solid, the report was not nearly strong enough to add to the risk of rate hikes. Indeed, investors had instead narrowed the odds on future policy easing in the wake of the benign US inflation report.

Futures now implied about a 47% chance of a cut in the 4.35% cash rate in December, with a move to 4.10% almost fully priced in by April.

The Reserve Bank of Australia (RBA) meets on June 18 and is considered certain to hold rates steady, as it has done since hiking in November last year.

Bond markets had also been boosted by the US inflation report and three-year futures were up 7 ticks at 96.120, having earlier hit a one-month top of 96.160.

New Zealand markets reacted much the same, with futures now implying a 44% chance the Reserve Bank of New Zealand (RBNZ) could ease as early as October.

The market has 32 basis points of cuts priced in for this year, even though the central bank itself is projecting no move until mid-2025.

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