SYDNEY: The Australian and New Zealand dollars weakened on Friday, awaiting a US inflation report that could signal persistent price pressures amidst global trade tensions.
The Australian dollar (Aussie) edged down 0.2% to $0.6292, after a slight overnight gain. It's on track for a 0.4% weekly increase, fluctuating between $0.6260 and $0.6330. It has risen 1.9% for the first quarter.
Similarly, the New Zealand dollar (kiwi) fell 0.2% to $0.5725, after a 0.2% overnight rise. It's poised for a 0.1% weekly decline, with resistance at $0.5760, and is up 2.6% for the quarter.
Despite recent global stock declines following US tariff announcements, the Aussie and kiwi have shown resilience, often serving as proxies for global risk sentiment.
“A corrective recovery to the 0.6440-0.6630 area during the month ahead is possible given the market’s recent disenchantment with the US dollar,” noted Imre Speizer, a strategist at Westpac, adding that sentiment regarding China’s economic outlook is stabilising with announced measures to stimulate consumption.
Traders are focused on the upcoming release of the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, with forecasts indicating a 0.3% monthly rise in the core measure.
An unexpectedly high inflation figure could complicate the Federal Reserve's policy decisions, as tariffs pose a threat to economic growth while potentially fueling inflation.
Looking ahead, the Reserve Bank of Australia (RBA) is expected to maintain steady rates at 4.1% on Tuesday. Market expectations, however, lean towards rate cuts, with swaps markets pricing in a 64% probability of a cut in May and rates falling to 3.4% by year-end.
</nThere was little reaction to the announcement from Australia’s Prime Minister Anthony Albanese for a national election on May 3, launching a five-week campaign on the promises of more tax cuts and cost-of-living relief.
Key Points:
- AUD: Down 0.2% to $0.6292, weekly rise of 0.4%, quarterly rise of 1.9%.
- NZD: Down 0.2% to $0.5725, weekly dip of 0.1%, quarterly rise of 2.6%.
- US Inflation Data: Focus on Personal Consumption Expenditures Price Index.
- RBA Rate Decision: Expected to hold steady at 4.1%, with potential for future rate cuts.
Market Expectations for RBA Rate Cuts:
- 64% probability of a rate cut in May.
- Rates seen falling to 3.4% by the end of the year.