Australian dollar braces for RBA decision, kiwi awaits more fiscal pain
SYDNEY: The Australian dollar was bracing for a central bank policy meeting where a quarter-point cut has been widely expected, while the kiwi awaited a government budget that will include painful cost-cutting measures even as the economy struggles.
The Aussie inched up 0.1% to $0.6410 on Monday, after a seesaw week that saw it hit a high of 65 cents, only to end 0.1% lower.
It is running into selling pressures at a key chart level of $0.6454 while support is at $0.6360.
The kiwi dollar was 0.2% firmer at $0.5891, after finishing last week 0.4% lower.
It is well short of last week's top of $0.5969, with major support lying at $0.5845.
Data from China - the two Antipodean countries' biggest trading partner - showed industrial output surprised on the upside in April against the backdrop of sky-high US tariffs, although retail sales missed forecasts, pointing to still sluggish consumers.
The Reserve Bank of Australia will decide on its monetary policy on Tuesday.
Markets are 100% priced for a quarter-point cut in the 4.10% cash rate, while 42 of 43 economists in a Reuters poll expected the same.
It is rare for the RBA to go against such high pricing, but as the labour market remained unequivocally strong and global trade volatility settled somewhat, analysts do not expect policymakers to explicitly commit to further easing.
Australian dollar perched at five-month top, outlook brightens
Swaps imply another two more rate cuts by the end of the year.
'The RBA will definitely cut the policy rate in May… don't expect the Governor to entertain any speculative conjecture in her press conference,' said Stephen Miller, GSFM investment specialist.
'The Governor this time around will wish to give herself and the Board maximum optionality for future RBA Board meetings.'
Across the Tasman Sea, the New Zealand government is set to unveil its budget on Thursday.
Officials have already said the baseline spending in the 2025 budget would be reduced to NZ$1.3 billion ($777 million) from a forecast of NZ$2.4 billion.
Analysts at Westpac said this year's deficit is on track to print slightly below expectations.
'The sustained spending restraint that is likely to be depicted in the Budget will require significant discipline and ongoing tough choices,' Westpac said.
Markets also expect the Reserve Bank of New Zealand to cut its 3.5% cash rate by a quarter point when it meets on May 28.
The central bank is far ahead of the RBA, having already eased by 200 basis points.
Investors suspect it might nearly be done, with rates seen bottoming at 3.0%.
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