Australia, NZ dollars caught in countdown to US jobs test
- A break of $0.6866 would risk a test of the March trough at $0.6834
SYDNEY: The Australian and New Zealand dollars marked time on Thursday as markets globally braced for a US jobs report that could impact the risk of a rate rise there, putting bonds under pressure.
The Aussie idled at $0.6894, having eased 0.4% overnight and away from resistance at $0.6930.
A break of $0.6866 would risk a test of the March trough at $0.6834.
The kiwi dollar was a shade firmer at $0.5676, after dipping 0.1% overnight.
Immediate resistance lies at $0.5690, with support around $0.5627 and $0.5581.
The Aussie also took a glancing blow from data showing Australia’s goods balance swung to a surprise deficit of A$3.0 billion in May, the largest since late 2015 and a shock to analysts forecasting a A$2.2 billion surplus.
A drop in exports and a rise in imports suggest trade could be a drag on economic growth this quarter, just as it was in the first quarter.
Otherwise, investors are tense ahead of the US June payrolls report, as upbeat data would strengthen the case for a rate hike, while a weak report would ease pressure.
Median forecasts call for a 110,000 job increase, but estimates range from 25,000 to 200,000, leaving plenty of scope for a surprise.
Markets are positioned for a high number, in part due to hiring for the World Cup, which has seen Treasuries sell off.
Australian bonds have followed suit, with 10-year yields up 9 basis points so far this week to 4.813%.
The spread over Treasuries remained relatively low at 29 basis points, compared to around 70 basis points in April, as markets pare the chance of rate hikes from the Reserve Bank of Australia.
A continued slide in oil prices has reduced the probability of a rate rise in August to 15%, down from 50% a month ago.
Further out, markets are evenly split on whether there will be one more increase in the cash rate to 4.35%.
The Reserve Bank of New Zealand meets next week, and investors are wagering heavily on a rise in the cash rate to 2.25%.
“We forecast a hike to 2.50%, but the RBNZ could signal patience around how quickly it intends to lift the cash rate towards neutral,” said Prashant Newnaha, an analyst at TD Securities.
“This should cap any uptick in yields, while initial NZD strength is unlikely to be outsized.”
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