Key points:
The Australian and New Zealand dollars are on track to finish the month with strong gains, buoyed by breaks through key chart barriers and a waning U.S. dollar.
The Australian dollar (AUD) stood at $0.6797 after reaching an eight-month high of $0.6823, marking a 3.9% gain for the month. Resistance levels are now in sight, with $0.6871, a peak from last December, and $0.6894, as the next targets.
Similarly, the New Zealand dollar (NZD) held at $0.6268, having touched a high of $0.6298 overnight. This performance has lifted the kiwi by 5.1% for the month, positioning it for a potential rise towards $0.6369, the high from December. Support for the NZD is found around $0.6195.
See: Upside prevails for kiwi as seen on the VT Markets app.
This momentum reflects four consecutive weeks of gains for the Aussie and five for the kiwi. Market sentiment has shifted as traders increasingly expect the U.S. Federal Reserve to begin an extended easing cycle in September.
In Australia, recent economic data has tempered expectations of a near-term rate cut. Consumer price figures released earlier this week showed that inflation had not slowed as much as anticipated in July, leading investors to reduce the implied probability of a rate cut in November from 56% to 40%.
The likelihood of a December easing has also decreased, now at 86%, down from being fully priced at the start of the week.
Friday’s data revealed that retail sales in Australia were flat in July, falling short of analysts’ expectations for a 0.3% rise. This subdued outcome suggests that consumers are not rushing to spend cash from the wide-scale tax cuts implemented at the start of the month. The Reserve Bank of Australia (RBA) had been concerned that these tax cuts could spur spending and exacerbate inflationary pressures.
In contrast, New Zealand’s economic outlook has brightened slightly. A recent survey of consumers showed a modest recovery from deep lows in August, while business confidence surged to its highest levels in a decade. Despite this, a quarter-point rate cut remains fully priced for October.
Markets have slightly reduced the likelihood of a more aggressive half-point move, with 71 basis points of easing implied by November and a total of 208 basis points by the end of 2025.
In case you missed: Aussie targets $0.6871 on strong inflation data; kiwi gains on confidence boost
As the month draws to a close, the Australian and New Zealand dollars appear poised to continue their upward trajectory, supported by a combination of domestic resilience and the diminishing appeal of the U.S. dollar.
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