Australian and New Zealand Dollars Steady Amid U.S.-Japan Trade Talks
The Australian and New Zealand dollars showed resilience on Wednesday, buoyed by the news of a potential U.S. trade deal with Japan, which has improved risk sentiment somewhat. However, it hasn’t entirely alleviated the uncertainties hanging over the U.S. dollar.
On Tuesday, trade agreements between the U.S. and Japan were announced, featuring a 15% tariff. Although there were hints it might drop below 25%, the lack of detailed information has dampened stronger reactions.
“We’re looking forward to seeing where this process takes us,” remarked Shane Oliver, the Chief Economist at AMP. But he also cautioned that rising rates, reminiscent of levels from earlier this year, pose a significant risk to U.S. economic growth and could disrupt global trade.
The currency market has reacted cautiously. As of now, the Australian dollar is at $0.6562. The U.S. dollar has shown some relaxation, helping the Australian dollar to recover by 0.5% overnight.
This situation highlights a point of interest: last week’s low was $0.6454, while the highest mark in the past eight months stood at $0.6595.
Meanwhile, the New Zealand dollar is holding at $0.6006, having climbed nearly 0.6% overnight and moving away from its recent low of $0.5906. Resistance currently hovers around $0.6043.
Australian statisticians have announced a shift to a complete monthly consumer pricing series, which could accelerate interest rate adjustments. Still, no domestic data was released to accompany this announcement.
Australia is one of the few developed nations reporting quarterly CPI, making it challenging for policymakers to accurately gauge inflation trends promptly.
This month, the Reserve Bank of Australia opted not to cut rates, choosing instead to await the second-quarter CPI report due on July 30. Historically, the RBA has been slow to adjust rates based on quarterly CPI data, suggesting that the new series set to launch in November might expedite the process.
Central bank leader Michele Bullock is scheduled to discuss inflation and employment on Thursday, likely emphasizing the importance of shifts in data trends.
Currently, the market anticipates a near-certainty that the RBA will lower the cash rate from 3.85% in August, potentially reducing it to 3.10% by the year’s end.
