By Wayne Cole
SYDNEY, April 21 (Reuters) - The Australian dollar held
firm on Friday after its U.S. counterpart slipped on a patch of
soft data, while the New Zealand dollar was still smarting from
a surprising pullback in headline inflation.
The Aussie stood at $0.6737 , having added 0.4%
overnight. It faces resistance at $0.6750 ahead of the recent
seven-week top of $0.6808, while support lies at $0.6681.
The kiwi dollar faded to $0.6168 , after touching a
five-week low of $0.6150 overnight. That divergence saw the
Aussie hit a two-month peak on the kiwi at NZ$1.1922 ,
having jumped 0.8% on Thursday.
Those losses followed data showing New Zealand consumer
price inflation slowed to an annual 6.7% in the first quarter,
under forecasts of 7.1%.
While tradable inflation hit its highest since 1999 it was
still well below what the Reserve Bank of New Zealand (RBNZ) had
forecasted and suggested inflation had finally peaked.
The market is still pricing a 75% chance the hawkish RBNZ
will hike by a quarter point to 5.5% in May, but now sees rate
cuts starting early next year given the economy is clearly
slowing. Two-year swaps duly fell back to 5.05% , from a
top of 5.255% early in the week.
"We wonder whether we are getting to the point where any
future RBNZ rate hike from current lofty levels may simply help
cement fears of recession and future rate cuts, such that future
RBNZ rate hikes may be less NZD-supportive," said Andrew
Ticehurst, an analyst at Nomura.
"We maintain our positive AUD/NZD view, and have increased
the target on our long position with a target of NZ$1.1200 by
end-Q2."
The data also suggested some downside risk for Australian
consumer prices due on April 26. Analysts are generally looking
for headline inflation to slow to 7.0%, from 7.8%, with the
trimmed mean measure dipping to 6.7% from 6.9%.
That might still be high enough for the Reserve Bank of
Australia (RBA) to hike its 3.6% cash rate in May given the
concerns revealed in their April policy minutes. "We think that if Q1 23 underlying inflation is in line with
our forecasts a 25bp rate hike at the May Board meeting is more
likely than not, particularly given the labour market remains
very tight," said Gareth Aird, head of Australian economics at
CBA.
"But we continue to look for rate cuts in late 2023 as we
believe inflation will fall more quickly than the RBA currently
anticipates."
(Reporting by Wayne Cole
Editing by Shri Navaratnam)
Messaging: wayne.cole.thomsonreuters.com@reuters.net))
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