Australia and NZ dollars bounce, rate cut buzz still a burden
The Aussie edged up 0.3% to $0.6505, and off a three-week low of $0.6454 hit overnight.
That left it down 1% for the week and short of a recent eight-month top of $0.6595.
The kiwi dollar bounced 0.4% to $0.5955, having touched a trough of $0.5906 overnight. It was down 0.9% on the week, moving further away from a nine-month high of $0.6120 hit on July 1.
A surprisingly soft jobs report this week has seen markets move to fully price in a quarter-point rate cut to 3.60% from the Reserve Bank of Australia (RBA) when it meets on August 12.
There is talk the RBA might consider an easing of 50 basis points, as they did in May, though that might look like it was admitting a mistake by not cutting this month.
One hurdle is the consumer price report for the second quarter due at the end of July where a reading on core inflation of 0.8% or above could give the RBA pause.
Most analysts are expecting around 0.7%, which would see annual core inflation slow to 2.7%, from 2.9%, and nearer the middle of the RBA's 2% to 3% target band.
The disappointing jobs data suggests it would now take a very high inflation number to prevent a cut, while a result around 0.6% could see the market get even more dovish.
'Should Q2 CPI print weaker and reciprocal U.S. tariff developments step up, then we may well head into the August meeting with more than 25bp priced,' said Su-Lin Ong, chief economist at RBC Capital Markets.
'There are clearer signs of loosening with the labour market moving more into balance from erring tight,' she added. 'Coupled with inflation back within target, this suggests that policy settings should move more quickly towards neutral.'
Ong is tipping cuts in August, November and early next year.
Market are priced for a finishing point of 3.10%, with a 40% chance of reaching 2.85%.
New Zealand's CPI report is due on Monday and forecast to show a rise in the annual pace to 2.8% from 2.5%, largely due to food and electricity prices.
However, core measures are expected to be more benign, leaving the door open to a rate reduction in August.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
3 days ago
- Business Recorder
Australia and NZ dollars bounce, rate cut buzz still a burden
SYDNEY: The Australian and New Zealand dollars regained some footing on Friday as their U.S. counterpart ran into fresh selling, but for the week both nursed losses as markets increased bets on rate cuts at home. The Aussie edged up 0.3% to $0.6505, and off a three-week low of $0.6454 hit overnight. That left it down 1% for the week and short of a recent eight-month top of $0.6595. The kiwi dollar bounced 0.4% to $0.5955, having touched a trough of $0.5906 overnight. It was down 0.9% on the week, moving further away from a nine-month high of $0.6120 hit on July 1. A surprisingly soft jobs report this week has seen markets move to fully price in a quarter-point rate cut to 3.60% from the Reserve Bank of Australia (RBA) when it meets on August 12. There is talk the RBA might consider an easing of 50 basis points, as they did in May, though that might look like it was admitting a mistake by not cutting this month. One hurdle is the consumer price report for the second quarter due at the end of July where a reading on core inflation of 0.8% or above could give the RBA pause. Most analysts are expecting around 0.7%, which would see annual core inflation slow to 2.7%, from 2.9%, and nearer the middle of the RBA's 2% to 3% target band. The disappointing jobs data suggests it would now take a very high inflation number to prevent a cut, while a result around 0.6% could see the market get even more dovish. 'Should Q2 CPI print weaker and reciprocal U.S. tariff developments step up, then we may well head into the August meeting with more than 25bp priced,' said Su-Lin Ong, chief economist at RBC Capital Markets. 'There are clearer signs of loosening with the labour market moving more into balance from erring tight,' she added. 'Coupled with inflation back within target, this suggests that policy settings should move more quickly towards neutral.' Ong is tipping cuts in August, November and early next year. Market are priced for a finishing point of 3.10%, with a 40% chance of reaching 2.85%. New Zealand's CPI report is due on Monday and forecast to show a rise in the annual pace to 2.8% from 2.5%, largely due to food and electricity prices. However, core measures are expected to be more benign, leaving the door open to a rate reduction in August.
Business Recorder
3 days ago
- Business Recorder
Miners power Aussie shares to record high on BHP copper output, firm iron ore
Miners propelled Australian shares to an all-time high on Friday, driven by BHP Group's record quarterly copper production and higher iron ore prices, while upbeat U.S. retail sales data for June further fuelled investor optimism. The S&P/ASX 200 index rose 0.6% to scale a record peak of 8,693.5 points by 0020 GMT. The benchmark is set for a weekly rise. Investor sentiment was buoyed by data showing U.S. retail sales beat expectations in June, signalling steady economic growth and sending U.S. shares higher. The print further boosted sentiment after a surprisingly soft local jobs data on Thursday strengthened market bets that the Reserve Bank of Australia could cut rates as early as next month. Miners led the benchmark higher, climbing 1.3% on stronger iron ore prices. BHP Group, the world's largest listed miner, rose nearly 2% after reporting an annual copper production above 2 million metric tonnes for the first time, beating analysts' expectations. Other sector majors Rio Tinto and Fortescue gained 1% and 1.4%, respectively. Technology stocks rose as much as 1.5% to a record high, tracking gains in Wall Street peers. Energy stocks added 0.4% as oil prices climbed after drones struck Iraqi Kurdistan oil fields for a fourth day, pointing to continued risk in the volatile region and stoking supply fears. Woodside Energy, Australia's largest independent oil and gas producer, added 1.2%. The sub-index was set for a weekly rise of nearly 2%, its steepest weekly gain in about a month. Financial stocks traded 0.4% higher and were set for a second straight week of gains, with the 'Big Four' lenders rising between 0.1% and 0.6%. New Zealand's benchmark S&P/NZX 50 index lost 0.1% to 12,891.57 points.
Business Recorder
3 days ago
- Business Recorder
Dollar gains broadly, yen dips
NEW YORK: The dollar rose on Thursday after data showed retail sales rose more than expected in June, following a turbulent session on Wednesday when US President Donald Trump denied reports that he is planning to fire Federal Reserve Chair Jerome Powell. The dollar has rallied this month in what analysts say is largely consolidation following a sharp selloff for most of this year. The dollar index remains down 9% year-to-date. Rising Treasury yields this month are supporting the dollar's rebound. 'After having a historic sell-off in the first half, the dollar has begun the second half on firmer footing. It looks like mostly short covering backed by these firmer US interest rates,' said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. The dollar extended gains on Thursday after data showed US retail sales rebounded more than expected in June, while the number of Americans filing new applications for jobless benefits also fell last week. However, the greenback quickly fell back and traded close to where it was before the data, which Chandler said shows 'the lack of near-term conviction.' Investors are weighing multiple factors that could influence market direction, including the economic impact of Trump's tariff policies, the US fiscal and debt outlook, and the Fed's independence. The dollar tumbled on Wednesday on reports that Trump was planning to fire Powell soon, before paring the drop when Trump denied the news. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was last up 0.39% on the day at 98.73, with the euro down 0.42% at $1.1585. In other currencies, sterling weakened after data showed British pay growth slowing in May and employee numbers dropping further last month. The British pound was last down 0.16% at $1.3398. Meanwhile, concerns mounted over a pivotal election in Japan and a still elusive trade deal with the US to avoid a punishing rise in tariffs. Japan's currency fell as polls showed Prime Minister Shigeru Ishiba's coalition was in danger of losing its majority in the upper house. The yen was weakened 0.46% against the greenback to 148.56 per dollar after touching its weakest level since April 3 in the previous session. The Australian dollar slid after jobs data badly missed forecasts and unemployment hit highs not seen since late 2021. The Aussie was last down 0.8% versus the greenback at $0.6474. In cryptocurrencies, bitcoin fell 1.26% to $118,425.
