Australia, NZ dollars idle as greenback looms large, China gains fade
The Australian and New Zealand dollars remain stagnant as the greenback dominates the currency market. Investors are eagerly anticipating the release of U.S. inflation data later in the week, which has tempered gains prompted by hopes of a market rescue package from China.
The Australian dollar is currently at $0.6575, having erased most of its overnight gains and falling below the bearish signal of the 200-day moving average at $0.6579. The currency had initially climbed to a high of $0.6612 following reports from Bloomberg that Beijing intended to mobilize approximately 2 trillion yuan ($278 billion) to stabilize China’s struggling stock markets.
Similarly, the New Zealand dollar is experiencing a lack of movement, trading at $0.6096. Although it had gained 0.4% overnight, reaching as high as $0.6116, the currency found support at the 200-day moving average of $0.6088.
The strength of the U.S. dollar in the new year, as investors push back expectations of the first rate cuts from the Federal Reserve, has contributed to its resilience. The dollar index surged to a six-week high overnight, recording a 2.1% increase against major currencies. This hike was aided by a renewed climb in yields in anticipation of U.S. GDP and inflation data.
In New Zealand, the fourth-quarter inflation report delivered few surprises with the consumer price index (CPI) rising by 0.5% from the previous quarter, in line with expectations. However, the annual rate slowed to 4.7%, the lowest since mid-2021. Jarrod Kerr, chief economist at Kiwibank, expressed his thoughts on the matter, stating, Inflation came in bang in line with our expectations… But deep down we were hoping for a downside surprise. Inflation is running well below the RBNZ’s forecasts. But we are still a ways away from our central bank pivoting. Following this news, the two-year swap rate in New Zealand rose by 7 basis points to 4.7980%, reaching its highest level in two weeks.
Meanwhile, in Australia, Prime Minister Anthony Albanese announced his intentions to consult lawmakers regarding proposed tax cuts for higher earners, potentially breaking an election pledge. The Australian Financial Review reported that any modifications would be budget and inflation neutral.
As traders eagerly await the release of U.S. inflation data and the implications it may have on the greenback, the Australian and New Zealand dollars continue to face uncertainties. The market will closely monitor these currencies in the coming days.
