The Australian dollar was aiming for a firmer weekly finish on Friday in the wake of upbeat domestic jobs data, while the New Zealand dollar lagged ahead of a central bank rate decision next week. The Aussie was 0.2 percent firmer at $0.7594 by midday. That put it up 0.8 percent for the week which, if sustained, would be the highest close in almost three months. Stiff resistance, however, was expected around Wednesday’s peak of $0.7636, with support coming in at $0.7569. The kiwi was little changed on the day, and the week, at NZ $1.7210. It lapsed from an NZ $0.7320 top earlier in the week after data on economic growth disappointed.
The Aussie had fared better as domestic data showed a sharp 42,000 jump in employment in May and a drop in the jobless rate to a four-year low of 5.5 percent. “The acceleration in job creation makes rate cut talk even less plausible and places pressure on AUD speculative shorts,” said Sean Callow, a senior currency strategist at Westpac. The data helped offset weakness in key commodity exports, including iron ore, which would otherwise argue for the Aussie being near 74 cents, he added.
“The commodity backdrop leaves us leaning towards selling AUD/USD rallies. But the near-term range has probably risen to say $0.7550-$0.7650, up about half a cent on the week.” The Aussie had another wild ride against sterling, which fell as far as A$1.6673 before bouncing to A$1.6811 after a Bank of England policy meeting came surprisingly close to raising rates. Three of the BoE’s eight policymakers voted for a rate rise in the tightest vote since 2007 and despite signs of a slowdown in Britain’s economy.
This was becoming something of a trend abroad, with the Bank of Canada sounding unexpectedly hawkish earlier in the week. In contrast, markets assume central banks in Australia and New Zealand will keep their rates at record lows for a long time to come. Interbank futures even imply a small chance the Reserve Bank of Australia (RBA) might cut again by year end, and show no chance of a hike until the second half of 2018.
The RBNZ has its policy announcement on June 22 and is widely expected to stick with a commitment to holding rates steady until late 2019 given a slowing economy. Gross domestic product (GDP) rose a modest 0.5 percent in the first quarter, well short of the central bank’s prediction. “A soft NZ Q1 GDP report did the NZD no favours and, combined with the stronger USD, it has steadily fallen back to around the 0.72 mark,” said BNZ currency strategist Jason Wong, in a research note.
“After a very strong run since mid-May, the NZD is well overdue for a consolidation phase,” he added. New Zealand government bonds eased, sending yields 3 basis points higher at the long end of the curve. Australian government bond futures slipped in line with U.S. Treasuries. The three-year bond contract eased 4 ticks to 98.190, while the 10-year contract shed 5.75 ticks to 97.5400.