Australia, NZ dollars steady near multi-month highs, with eyes on US trade deals
SYDNEY: The Australian and New Zealand dollars inched higher towards multi-month peaks on Monday, with their future direction dependent on how US trade deals shape up as a tariff deadline looms.
The Aussie rose 0.1% to $0.6540, having rallied 1.3% last week to close above 65 cents for the first time since November last year.
That was a strong comeback from a trough of $0.6373 earlier in the week when concerns over the Iran-Israel conflict were rocking markets.
Resistance is, however, stiff at $0.6564 and $0.6687, charts show.
The kiwi dollar gained 0.3% to $0.6074, after rising 1.5% last week.
It was a whisker away from the recent eight-month top of $0.6088 and quite a bit off the low of $0.5883 struck last Monday.
With tensions in the Middle East largely receding, investors are focused on the developments in the US trade deal negotiations, with a wary eye on the progress of a US tax-cutting and spending bill slowly making its way through the Senate.
Treasury Secretary Scott Bessent said various trade deals with other countries could be done by September 1, suggesting some wiggle room on the July 9 deadline to reach deals or face aggressive 'reciprocal' US tariffs.
Helping risk sentiment, Canada on Monday rescinded its digital services tax targeting US technology firms in a bid to advance trade negotiations with the US 'AUD/USD will extend last week's gains towards the next resistance level at 0.6700 if the Trump administration announces more trade deals,' said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
'Conversely, AUD/USD will correct lower to near support at 0.6428 if negative news emerges regarding US trade negotiations.'
Nonetheless, the technical set-up for the Aussie is bullish given markets have almost fully priced in a rate cut from the Reserve Bank of Australia next Tuesday following a tame inflation reading for May.
Swaps imply a 92% probability that the RBA will cut the current 3.85% cash rate again, having just moved in May.
A total easing of 95 basis points - about four rate cuts - has been priced in by early next year. In contrast, the Reserve Bank of New Zealand may well sit out the next meeting on July 9, with swaps suggesting a 23% probability for a quarter-point cut in the 3.25% cash rate.
A private survey showed on Monday New Zealand business confidence jumped in June as global tariff turmoil faded.
Looking ahead, Australia will release retail sales data on Wednesday.
Forecasts are centred on a bounce of 0.3% in May after a dip in April, with the rate cuts so far supporting the outlook for consumer spending.
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