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Business Recorder
16-05-2025
- Business
- Business Recorder
Australia, NZ dollars steady after seesaw week, rate cuts loom
SYDNEY: The Australian and New Zealand dollars were flat on Friday after a seesaw week that saw them spike on a US-China tariff truce only to run into selling at major chart barriers, reinforcing recent ranges. The Aussie steadied at $0.6405, having bounced from a $0.6358 low early in the week to as high as $0.6501 before fading away. A break of $0.6350 or $0.6515 is needed to set a new trend in motion. The kiwi dollar was a shade softer at $0.5866, and well short of the week's top of $0.5969. Major support lies at $0.5845 and a breach could see a retracement to $0.5760. The Aussie failed to get any lasting lift from Thursday's upbeat jobs report, in large part because markets remain confident the Reserve Bank of Australia will still cut interest rates when it meets on May 20. 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. Analysts also assume the RBA will remain guarded about any future easing. 'The RBA's communication strategy has largely erred on the side of caution, and we do not expect the Board to provide any forward guidance on the likely timing of further rate cuts,' said Gareth Aird, head of Australian economics at CBA. 'We continue to favour the RBA cutting rates at a quarterly cadence of 25bp through 2025,' he added. 'But we are cognisant of the risk that the RBA moves a little more quickly to a neutral rate around 3.35% if the trend unemployment rate steps up in a non-trivial way.' Investors have scaled back how far rates might fall this year to 75 basis points, from more than 100 basis points a couple of weeks ago. Australia, New Zealand dollars maintain strong gains as global economy outlook brightens Adam Boyton, head of Australian economics at ANZ, expects cuts in May and August, but is no longer looking at an easing in July since progress in US-China tariff talks has lessened the risk of a global economic shock. 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, reflecting a much weaker domestic economy, having already eased by 200 basis points. Investors suspect it might nearly be done, with rates seen bottoming at 3.0%.
Business Recorder
02-05-2025
- Business
- Business Recorder
Australia, NZ dollars perk up on hopes for US-China progress
SYDNEY: The Australian and New Zealand dollars edged up on Friday as investors hoped there might be some tentative progress on US-China trade talks, which helped offset a soft reading on local consumption. Figures on Australian retail sales showed only a modest rise of 0.3% in March, while volumes for the whole first quarter failed to grow at all in a blow to the economy. The subdued result suggested the Reserve Bank of Australia would again have to trim its outlook for household spending, adding to the case for a rate cut at its next meeting on May 20. 'We view an RBA rate cut of 25 bp in May as a near certainty, given the benign inflation outcomes over the past two quarters and the downside risks to global and domestic growth stemming from global trade policy uncertainty,' said Adam Boyton, head of Australian economics at ANZ. 'It is worth keeping in mind that policy, not just the economy, responds to shocks, and we expect 75 bps of cuts for the remainder of this year.' Markets are fully priced for a quarter-point cut in the 4.10% cash rate this month and see rates at 3.0% or lower by year-end. For currencies, even the chance of progress in the Sino-US standoff on tariffs was enough to boost risk sentiment. The Aussie firmed 0.4% to $0.640, recouping overnight losses. The currency has now failed multiple attempts to break above $0.6450 resistance, but has also found solid support around $0.6340. The kiwi dollar nudged up to $0.5920, after dropping 0.5% overnight before finding support at $0.5890. It remains well short of the recent peak of $0.6029 and technical risks are for a further retreat toward $0.5820. The Aussie also made ground on the yen, gaining 1.6% to a one-month top of 93.05 after a dovish outlook on inflation from the Bank of Japan led markets to scale back the chance of a rate hike there anytime soon. Australia, NZ dollars make the most of US tariff tangle At home, there was some risk of political uncertainty ahead as Australia goes to the polls this weekend in a tight race between the incumbent Labor government and the Liberal National opposition, which could result in a hung parliament. However, markets have historically been little impacted by elections since the major parties' economic policies are considered centrist and no threat to financial stability, while both are committed to the independence of the central bank.
