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SYDNEY: The Australian and New Zealand dollars enjoyed some relief on Tuesday although some of the bounce was pared back after US President-elect Donald Trump denied a report that his tariff agenda won’t be as aggressive as feared.

The Aussie was little changed at $0.6246, having rallied 0.5% overnight to as high as $0.6302, the strongest level since mid December, although it is still dangerously close to the 2022 low of $0.6170.

The fact it failed to sustain the rally and never broke above $0.6340, a key resistance level, is again a bearish sign, which left a lot hanging on local inflation data this week.

The kiwi dollar traded at $0.5640, after rising 0.6% overnight to as far as $0.5684, also the highest since mid December. It has support at its 2022 nadir of $0.5512.

The two currencies spiked overnight as the Washington Post reported that Trump’s aides were exploring tariff plans that would cover only certain sectors deemed critical to national or economic security.

That would mark a significant shift from Trump’s campaign pledge for broader tariffs. But gains were partially unwound after Trump took to social media and called the story wrong.

“If we’ve learned anything over the years, it’s that Trump is unpredictable. He loves shaking up markets, but the final outcomes are often less dramatic than his initial announcements,” said analysts at ING in a note.

Australia, NZ dollars off 2-yr lows but inflation data looms

“If there is one lesson to take from today’s events, it is the increased volatility likely to accompany the speculation and delivery of the new administration’s agenda.”

For the Aussie, much is riding on consumer price data due on Wednesday.

Figures for November will help refine forecasts for the whole fourth quarter, which could be crucial for the Reserve Bank of Australia (RBA) deciding whether to cut interest rates in February.

A Reuters poll of economists expect headline inflation to pick up to an annual rate of 2.3% in November, from 2.1% the previous month, but underlying inflation, measured by the trimmed mean, is likely to slow further in welcome news for the RBA.

Markets imply around a 55% chance the Reserve Bank of Australia (RBA) will cut its 4.35% cash rate in February, and is fully priced for a quarter-point move in April.

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