Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

Australia, NZ dollars pressured as market trims Fed wagers

Published 09/07/2019, 01:13 pm
Updated 09/07/2019, 01:20 pm
© Reuters. Australia, NZ dollars pressured as market trims Fed wagers

By Wayne Cole

SYDNEY, July 9 (Reuters) - The Australian and New Zealand dollars were pinned near key support levels on Tuesday as local economic news disappointed and markets reconsidered the need for drastic policy easing in the United States.

The Aussie dollar AUD=D3 had edged down to $0.6957 and threatened a bearish break of a chart bulwark at $0.6956.

The kiwi NZD=D3 stood at $0.6626 and a long way from its recent top at $0.6737. It now has chart support in the $0.6590/0.6603 area.

Both currencies have lost ground to their U.S. counterpart since Friday's upbeat U.S. jobs report quieted calls for a sharp rate cut from the Federal Reserve this month.

Futures 0#FF: currently imply less than a 3% chance of a 50-basis-point easing, compared with 25% ahead of the data. A cut of 25 basis points is still fully priced in, leaving the market vulnerable should Fed Chair Jerome Powell not sound dovish in testimony on Wednesday. FEDWATCH

"If the Fed were to actively talk down July cut expectations, this would be the obvious time," said analysts at

RBC Capital Markets in a note. "But having passed up on opportunities to even hint that way in recent weeks, that seems less likely to happen."

"Our best guess is that his testimony will highlight all the positives of the U.S. economy and when asked about cuts, Powell will repeat lines on using all available tools to extend the recovery."

Data for Australia were not so positive, with a survey of business showing lacklustre conditions in June despite a cut in interest rates early in the month. Australia Bank's index of business conditions rose 2 points to a still modest +3, while confidence retraced its May gains and fell 5 points to +2.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The subdued outcome illustrated why the Reserve Bank of Australia (RBA) felt moved to cut rates in June and July, leaving them at a record low of 1%, and why markets are wagering on at least one more easing to 0.75%.

Futures 0#YIB: imply an 84% chance of a cut by December, with much depending on whether unemployment turns lower as the RBA hopes.

Yields on three-year bonds AU3YT=RR remain below the cash rate at 1.96%, though up from the recent historic trough at 0.884%. The 10-year bond future YTCc1 eased 1 tick to 98.6600, just off the recent all-time peak of 98.7350. (Editing by Jacqueline Wong)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.