Australia, NZ dollars suffer setback, NZ food prices shock
That left the Aussie nursing bruises at $0.6497, having fallen 0.8% overnight to wipe out two days of gains.
It did find support at $0.6483, but was now a long way for the week's top of $0.6568.
The kiwi dollar huddled at $0.5918, after shedding almost 1% overnight to as low as $0.5910.
Resistance is up at $0.5996, with more support around $0.5885. Data from New Zealand contained some unwelcome news on inflation as food prices rose 0.7% in July to be up 5% on a year earlier, with butter alone rising 42% and cheese 30%.
There were also sharp increases in electricity costs, petrol, air travel and holiday accommodation.
One bright spot was a slowdown in rents, which account for a large slice of CPI.
With the economy sluggish and plenty of spare capacity on the supply side, analysts still assume the Reserve Bank of New Zealand will cut rates again when it meets next week.
Markets imply a 95% chance of a quarter point reduction in the official cash rate to 3.0%, and perhaps one further move to a floor of 2.75% early next year.
Attention will be on its outlook for the economy and whether the path of the OCR is lowered from the 2.9% projected back in May, which is seen as the lower end of neutral.
'Higher food prices and continued increases in administered costs like rates, mean that inflation is likely to rise to around 3% before the end of this year, higher than the RBNZ had previously forecast,' noted Kelly Eckhold, chief NZ economist at Westpac.
'We don't expect a significant change in the RBNZ's OCR profile, which is still likely to indicate a chance of a further cut in November,' he added.
'Beyond this meeting a data-dependent easing bias seems likely.' Jarrod Kerr, chief economist at Kiwibank, thinks the RBNZ will be more dovish and lower the OCR floor to 2.75% or even 2.6%. 'The weakness in the economy demands stimulus,' he said.
'With all the risks offshore, and the pain still felt onshore, there's a good argument to be made for taking policy into stimulatory territory ASAP.
An argument that is growing in support.' Reuters
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
7 hours ago
- Business Recorder
Australia, NZ dollars suffer setback, NZ food prices shock
SYDNEY: The Australian and New Zealand dollars were back on the defensive on Friday after a high reading on US producer inflation quashed talk of aggressive rate cuts there and boosted the greenback. That left the Aussie nursing bruises at $0.6497, having fallen 0.8% overnight to wipe out two days of gains. It did find support at $0.6483, but was now a long way for the week's top of $0.6568. The kiwi dollar huddled at $0.5918, after shedding almost 1% overnight to as low as $0.5910. Resistance is up at $0.5996, with more support around $0.5885. Data from New Zealand contained some unwelcome news on inflation as food prices rose 0.7% in July to be up 5% on a year earlier, with butter alone rising 42% and cheese 30%. There were also sharp increases in electricity costs, petrol, air travel and holiday accommodation. One bright spot was a slowdown in rents, which account for a large slice of CPI. With the economy sluggish and plenty of spare capacity on the supply side, analysts still assume the Reserve Bank of New Zealand will cut rates again when it meets next week. Markets imply a 95% chance of a quarter point reduction in the official cash rate to 3.0%, and perhaps one further move to a floor of 2.75% early next year. Attention will be on its outlook for the economy and whether the path of the OCR is lowered from the 2.9% projected back in May, which is seen as the lower end of neutral. 'Higher food prices and continued increases in administered costs like rates, mean that inflation is likely to rise to around 3% before the end of this year, higher than the RBNZ had previously forecast,' noted Kelly Eckhold, chief NZ economist at Westpac. 'We don't expect a significant change in the RBNZ's OCR profile, which is still likely to indicate a chance of a further cut in November,' he added. 'Beyond this meeting a data-dependent easing bias seems likely.' Jarrod Kerr, chief economist at Kiwibank, thinks the RBNZ will be more dovish and lower the OCR floor to 2.75% or even 2.6%. 'The weakness in the economy demands stimulus,' he said. 'With all the risks offshore, and the pain still felt onshore, there's a good argument to be made for taking policy into stimulatory territory ASAP. An argument that is growing in support.' Reuters
Business Recorder
7 hours ago
- Business Recorder
Gold set for weekly drop as US data dims large Fed rate cut hopes
Gold prices gained on Friday, helped by a pullback in the dollar, although bullion was headed for a weekly fall as hotter-than-expected US inflation data dented expectations for a super-sized 50-basis-point (bps) Federal Reserve rate cut. Spot gold rose 0.4% to $3,348 per ounce as of 0506 GMT. Bullion has lost 1.5% for the week. US gold futures for December delivery gained 0.3% to $3,394.30. 'Gold is still grappling with the aftermath of the PPI jump, which raised questions over just how far the Fed may be inclined to reduce rates this year,' said Tim Waterer, chief market analyst at KCM Trade. US producer prices index (PPI) rose 3.3% year-on-year in July, beating forecasts of a 2.5% gain, Labor Department data showed on Thursday. Weekly jobless claims came in lower than expected at 224,000 versus estimates of 228,000. Separately, US consumer prices increased only marginally in July, bolstering hopes of a Fed rate cut. However, the PPI reading tempered hopes for an aggressive easing cycle, making it less likely that the Fed would opt for a 50 bps reduction at its next meeting. 'If this spike in wholesale prices turns into a trend which then translates into CPI gaining pace, expectations for US rate cuts could be scaled back, which may hinder gold's performance from a yield perspective,' Waterer said. St. Louis Fed President Alberto Musalem said a half-point rate cut in September was not warranted, a day after Treasury Secretary Scott Bessent said it was possible. Non-yielding gold thrives in a low-interest-rate environment. Offering some respite to gold, the dollar fell 0.2%, making gold less expensive for other currency holders. On the geopolitical front, investors are downplaying the chances of a major breakthrough on ending the war in Ukraine from Friday's meeting between Donald Trump and Vladimir Putin, despite some signs of progress. Elsewhere, spot silver gained 0.2% to $38.05 per ounce, platinum fell 0.3% to $1,352.99, and palladium lost 0.2% to $1,143.30. Reuters
Business Recorder
7 hours ago
- Business Recorder
Australian shares cross 8,900 level for first time, banks do the heavy lifting
Australian shares crossed the key 8,900 level for the first time on Friday, buoyed by gains in major banks as investors piled into financials despite stretched valuations on hopes that rate cuts would spur credit and economic growth. The S&P/ASX 200 index was up 0.2% at 8,894.60, as of 0103 GMT, after briefly crossing the 8,900 mark earlier in the day. The benchmark touched an all-time high of 8,901.80 points. The index was up about 1% for the week in what would be its second straight weekly gain. The Reserve Bank of Australia cut the cash rate by 25 basis points on Tuesday, matching market expectations, and leaving its door open for further policy easing this year to meet inflation and employment goals as the economy has lost some momentum. Financial and real estate stocks are expected to benefit from lower cash rates, which usually lead to higher lending volumes. Banks have risen 0.3% so far this week in what could be their third straight week of gains. Top lender CBA was down 0.3% for the day and set to log a weekly loss of 5.6%, its worst since mid-February. CBA reported a record annual profit on Wednesday, but investors dumped its shares on valuation concerns. Shares of ANZ were trading 1.3% higher after the country's fourth-largest bank in terms of market value reported a rise in deposits and loans for the third quarter. Tony Sycamore, market analyst at IG, also credited the index's momentum to strong corporate earnings of this week, including from Westpac, Suncorp and Origin. Real estate stocks climbed 0.2%, with Charter Hall Retail REIT and Goodman Group rising about 0.3% each. Miners climbed 0.6% even after iron ore prices closed lower overnight. BHP and Rio Tinto climbed 0.6% each, while Fortescue rose 1.3%. New Zealand's benchmark S&P/NZX 50 index rose 0.3% to 12,865.81. Reuters
