Australia, NZ dollars find some support, trend still down
TLT•The Australian and New Zealand dollars steadied above multi-month lows as a pause in a global bond selloff supported risk sentiment. Markets priced a 25% chance of another Reserve Bank of Australia rate hike in November after last week’s increase to 4.60%.
1. Currencies steady
The Australian dollar was flat at $0.6982 after gaining 0.2% overnight, moving further from its recent 13-week low of $0.6904. The New Zealand dollar held at $0.5623 after rising 0.4%; its downtrend has lasted six straight weeks, and a break below $0.5581 could threaten a fall to $0.5485.
2. RBA outlook
Markets priced a 25% chance of another RBA rate increase in November following last week’s hike to 4.60%. The minutes of the RBA’s policy meeting, expected October 13, are likely to sound hawkish overall after the board voted unanimously to raise rates.
3. Inflation in focus
September labor data and the September-quarter consumer price report due at the end of October could shift the outlook. Monthly releases have pointed to a 1.0% rise in core inflation, which would leave the annual pace at 3.6%, above the RBA’s 2% to 3% target range. Citi’s Josh Williamson said the bank would need to tighten policy further and said Citi expects a 25-basis-point hike in November, with a 4.85% terminal rate as its base case and risks of a delayed hike.
