SYDNEY, June 12 (Reuters) – The Australian and New
Zealand dollars were in a pensive mood on Wednesday awaiting
developments on U.S. inflation and interest rates that could
cause waves in currency and bond markets.
The Aussie inched up 0.1% to $0.6613, having barely
moved over the previous 24 hours. Support lies at the week’s low
of $0.6576, with resistance at $0.6615 and $0.6681.
The kiwi dollar was a fraction firmer at $0.6142,
having crept up from a low of $0.6100 at the start of the week.
Resistance is up at the recent three-month top of $0.6215.
Chinese inflation data missed forecasts with consumer prices
falling 0.1% in May, though with mixed implications as it
underlined the softness of domestic demand, while also adding to
the case for more stimulus.
That was just a taster for the U.S. consumer price report
which is expected to show a smaller rise of 0.1% for May, with
the core up 0.3%. The range of forecasts suggests the risk for
the core leans to the downside, which would be a relief to
markets and the Federal Reserve.
However, the Fed’s policy meeting is likely to see its dot
plot projections for rate cuts this year reduced from three to
two, and perhaps even one.
Markets have already scaled back expectations for easing
this year to 39 basis points – it was well over 100 basis points
back in January – but a hawkish Fed outlook would still put
upward pressure on bond yields and the U.S. dollar.
Such an outcome would also support market wagers that the
Reserve Bank of Australia (RBA) will not be easing for some time
to come.
The central bank meets next week and is considered certain
to hold rates at 4.35%, while reiterating that it is not ruling
out further hikes if necessary.
Markets have pretty much given up all hope of a cut this
year and now see April as the first likely window for an easing.
“Nothing in the local data flow in recent weeks has thrown
up a serious challenge to the market view that the most likely
scenario is for an extended stay at the prevailing cash rate,”
said Ray Attrill, head of FX strategy at NAB.
“There are non-trivial risks the next the next move could be
up if Q2 CPI in late July were to shock, or the first cut, we
and many other analysts have pencilled in for November, comes
later.”
(Reporting by Wayne Cole; Editing by Stephen Coates)
