SINGAPORE: The Australian and New Zealand dollars took a breather on Wednesday, settling in to the top half of recent ranges while traders waited on landmark data releases due later in the week.
The Aussie has bounced above $0.63 in recent days and held at $0.6365 on Wednesday, having struggled to get past resistance around $0.6410 while global markets have been shaky.
The kiwi dollar is similarly shy of resistance at $0.5870 and was hovering at $0.5816 in the Wellington afternoon.
The two currencies are plugged into global trade via exports of commodities and food and they have been caught in the cross-currents of a broad market selloff driven by US growth fears, which has also dragged down the US dollar.
Improving prospects for China’s economy have also been supportive, especially for the kiwi which has been rewarded for strength in dairy prices and promises in China of childcare subsidies - an encouraging sign for milk powder demand.
Against the Australian dollar, the New Zealand dollar hit three-month highs overnight before easing a touch to NZ$1.0941 per Aussie on Wednesday.
In Australia on Thursday employment data is due and another strong reading is expected, pinning the jobless rate at 4.1%.
That is likely to reinforce bets on the central bank taking rate cuts slowly and lend support to the currency.
Markets have priced in about 60 basis points of interest rate cuts in Australia and would need a surprise to add in more easing.
In New Zealand fourth-quarter GDP is due and a rise is expected - lifting the country out of recession - though not providing much relief.
Kiwi jumps to 3-month high as China’s outlook brightens
Analysts at Westpac said a new method of adjusting for seasonality could pump up the quarterly reading, so markets may focus on the annual rate of change, which economists see at -1.4% and likely to keep policymakers on a rate cutting path.
“This could put a ceiling on the NZD’s near-term recovery,” said Peter Dragicevich, Asia-Pacific currency strategist at payments platform Corpay.
The US Federal Reserve meets later on Wednesday with no policy changes expected but markets waiting to see what chair Jerome Powell says about US trade policy, the economy and the recent selloff in stocks and rally in bonds.
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