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The Australian dollar and New Zealand dollar have slumped since Monday ahead of a Reserve Bank of Australia (RBA) policy meeting, with market bets on a first break after back-to-back interest rate hikes.
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AUD/USD today fell slightly around 0.2% to $0.6676 after finishing the first quarter down 2%. Support is between $0.6662 and $0.6625 with resistance around $0.6752 with the 200-day moving average. NZD/USD also fell 1.5% to $0.6085. The kiwi is supported at its 21-day moving average around $0.6204 with major resistance around $0.6309. Tapas Strickland, head of market economics at National Australia Bank, said the RBA and RBNZ meetings would be the main focus for the rest of the week. He also expects the RBA to raise rates again, the last of which will be on Tuesday. Strickland said the risk is that the RBA will stall and maintain a bullish bias, preferring to play on the sidelines of a protracted battle against inflation, unless its hand is forced by the data. Economists are divided over whether the RBA will raise interest rates in the coming weeks. Fourteen of 27 economists polled by Reuters expect rates to rise by 25 basis points to 3.85%, while the rest expect them to remain on hold. Futures, however, have an 87% chance the RBA will hold rates at its policy meeting on Tuesday at 3.6%, with only a small risk of a rise this year. That is a sharp turnaround from earlier in the month when rates were seen hitting 4.1% or higher. Data on Monday showed building approvals are still down 33% from a record high in January. However, lower supply and surging immigration are supporting prices. Prices rose about 0.6% in March, the first increase in almost a year, data from CoreLogic shows. That would certainly be a welcome news story for the RBA and raise hopes that the economy is heading for a soft landing, even as interest rates are raised by 350bps to an 11-year high.
The RBNZ meets on Wednesday and markets are largely pricing in another 25bps hike to 5.00%. A further move to 5.25% is expected in July, but investors are skeptical rates will reach the RBNZ’s projected peak of 5.5% given the economy is already in recession.
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also read : AUD/USD Surges Above 0.6730 As China PMI Data Improves |
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