Updated January 9th, 2024 at 07:32 IST
Australian, New Zealand dollars stabilise on strong economic data
The New Zealand dollar inched up to $0.6255, finding support at $0.6213 in the previous session.
Dollar in focus: The Australian and New Zealand dollars recovered ground as Wall Street experienced a rally, rekindling risk appetite. Additionally, strong domestic retail spending data contributed to the positive sentiment.
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The Australian dollar rose to $0.6726, rebounding from an overnight low of $0.6678. Key resistance levels are identified at $0.6730 and $0.6771, while support is observed at $0.6641.
Meanwhile, the New Zealand dollar inched up to $0.6255, finding support at $0.6213 in the previous session. An improvement in the technical position would require a break of resistance at $0.6285.
Notably, Australian retail sales for November surged by 2.0 per cent, marking the largest increase in two years and surpassing market expectations of 1.2 per cent.
The boost was attributed to the popularity of Black Friday and Cyber Monday events, yet the seasonal adjustment process might skew November's figures at the expense of December.
Economist Abhijit Surya from Capital Economics expressed scepticism about a continuation of the tightening cycle by the Reserve Bank of Australia (RBA), especially if households cut spending sharply. There are concerns that the RBA might consider rate cuts as early as May, contrary to market expectations.
The focus now shifts to the upcoming November consumer price report on Wednesday, with analysts anticipating a slowdown in annual inflation to 4.4 per cent, down from October's 4.9 per cent. CBA economist Stephen Wu anticipates signs of disinflation in market services, aligning with soft activity indicators for Q4.
The market currently assigns a minimal likelihood of the RBA tightening rates further from the current 4.35 per cent. However, expectations of a rate cut in May have been reduced to around 36 per cent, with a higher probability of easing in June and almost full pricing by August.
Despite this, the market maintains a relatively modest 40 basis points of easing for all of 2024, in contrast to the 139 basis points priced for US rates. This discrepancy reflects the higher current US rates at 5.25 per cent-5.5 per cent.
(With Reuters Inputs)
Published January 9th, 2024 at 07:32 IST