Australia, NZ dollars run out of puff, ponder rate outlooks
By Wayne Cole
SYDNEY, May 21 (Reuters) -The Australian and New Zealand dollars faltered on Tuesday as momentum from last week's rally seeped away and markets pondered the outlook for steady interest rates at home.
The Aussie drifted off 0.2% to $0.6654 AUD=D3, having repeatedly failed to re-take its recent four-month top of $0.6714. Support lies under $0.6650 and around $0.6630.
Sentiment was aided by strength in prices for Australia's major commodities, notably copper where a squeeze on short positions drove prices to all-time highs.
The kiwi dollar eased to $0.6091 NZD=D3, and away from last week's one-month peak of $0.6139. It has support round $0.6083 and $0.6031.
Australia's central bank on Tuesday released minutes of its last policy meeting where it considered hiking rates again, but decided to hold steady awaiting further data on inflation and consumer spending.
"It seems holding for longer is the preferred strategy given soft activity, especially on the consumer side, unless inflation were to surprise sharply on the upside," said Tapas Strickland, head of market economics at NAB.
"We continue to expect a first cut in November given our forecasts for the economy are for subdued demand to see the labour market loosen a little more than the RBA expects in the near term."
Investors have already priced out any chance of another hike, but neither do they see much prospect of an early cut with a December move implied at 50-50. 0#RBAWATCH
The Reserve Bank of New Zealand (RBNZ) holds its policy meeting on Wednesday and considered certain to hold the official cash rate (OCR) at 5.5%. A Reuters poll of 30 analysts found all expected a steady outcome while the median forecast was for a first easing in the December quarter.
Markets imply a 46% chance of a cut as early as August, with an October easing put at 84%. Those odds narrowed last week when data showed inflation expectations subsiding. 0#RBNZWATCH
The RBNZ itself has projected no rate cuts until well into next year, and there is a risk it sticks with that outlook in its updated forecasts.
"The RBNZ can maintain pressure on inflation, by simply doing nothing, effectively holding the OCR track unchanged," said Jarrod Kerr, chief economist at Kiwibank.
"But we see inflation returning to within the RBNZ's 1-3% target by the September quarter, and continue to expect the next move to be a cut in November once the data confirm it."
Reporting by Wayne Cole; Editing by Lincoln Feast.
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
