SYDNEY: The Australian and kiwi dollars were in a holding pattern on Tuesday with their near-term fate dependent on the outlook for US interest rates, while a worsening budget bottom line in New Zealand came in as expected.
The Aussie was flat at $0.6369, having edged up 0.1% overnight.
It was still pinned near a one-year low of $0.6337, while resistance is heavy at $0.6430, $0.6471 and $0.6550.
The kiwi was little changed at $0.5786, after rising 0.4% overnight to move away from a one-year low of $0.5750.
Resistance is plentiful at $0.5817 and $0.5929.
New Zealand’s Treasury on Tuesday projected a bigger budget deficit for the current year, with rising unemployment and a slower improvement to the economy meaning it would not be able to return to surplus within the next five years.
“Broadly, the government is doing what they said they would: keeping spending growth contained in the pursuit of long-overdue fiscal consolidation,” said analysts at ANZ.
“Implications for monetary policy appear minimal. Fiscal policy is still expansionary, and things haven’t changed much since May’s budget.”
Australia, NZ dollars gloomy as markets ponder US rate outlook
The key risk event this week is the Federal Reserve policy meeting on Wednesday.
The US central bank is expected to cut rates by 25 basis points to a new range of 4.25% to 4.50%, but more importantly will be any guidance on future easing. Futures imply just two rate cuts for all of 2025.
In Australia, a survey from Westpac showed that consumer sentiment took a step back in December as concerns about the economic outlook outweighed an improvement in people’s own finances.
Local bond yields fell on Tuesday.
The three-year government bond yield dropped 4 basis points to 3.845%, after rising for four straight sessions.
Ten-year yields dipped 2 bps to 4.301%.
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