Australia, NZ dollars flat as markets eye US inflation data

SYDNEY: The Australian and New Zealand dollars were little changed on Wednesday, as traders braced for US inflation data that could influence the size of the next rate cut and potentially support further gains in the two antipodean currencies.

The Aussie held steady at $0.6588, having hit a seven-week top of $0.6619 overnight before the rally lost momentum.

Resistance is now around $0.6600 and $0.6625, and a break there would take the Aussie to the highest point since last November.

The kiwi dollar was also steady at $0.5927, following a four-week high of $0.5960 overnight before closing 0.3% lower.

It remains well below its 2025 peak of $0.6120.

Overnight, the US dollar bounced from seven-week lows as investors squared their short positions ahead of US producer reading and consumer price data, due on Wednesday and Thursday, respectively.

A disappointing US jobs report last week, along with sharp downward revisions to employment figures over the past year, prompted markets to fully price in a quarter-point rate cut from the Federal Reserve next week, while a larger 50-basis-point cut remains a small risk.

“The environment is improving for AUD/USD to make further gains,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.

“At 0.66, AUD/USD is just below the low end of the fair value range of 0.67 to 0.77, centred on 0.72.”

“We are more confident the global economy is improving, and the Reserve Bank of Australia is close to the end of its interest-rate-cutting cycle, a positive environment for further gains in AUD/USD.”

The Aussie has been buoyed by better-than-expected local data, prompting markets to scale back the chances of a November rate cut by the RBA to 80%, down from fully priced just two weeks ago. Firmer iron ore prices have also provided support.

“The USD’s correction still has room to run but with the caveat that the next leg lower will be slower. Nevertheless, there are unique relative value opportunities in between.

We like buying dips in EUR and AUD,“ said analysts at TD Securities in a note to clients.

Data on Wednesday showed China’s consumer prices fell at the fastest pace in six months in August but producer deflation eased, although it failed to elicit a response in the two currencies.