Australian dollar on defensive, NZ dollar hits 5-month low

Australian dollar on defensive, NZ dollar hits 5-month low

By Wayne Cole

SYDNEY, March 28 (Reuters)The Australian and New Zealand dollars were under pressure on Thursday as hawkish comments from the Federal Reserve gave their U.S. counterpart a lift, while intervention fears supported the Japanese yen.

The kiwi dollar NZD=D3 also broke support at $0.5986 to reach its lowest since mid-November at $0.5981. It now risks a retreat to $0.5941 and $0.5863.

The Aussie eased 0.1% to $0.6528 AUD=D3, leaving it uncomfortably close to chart support in the $0.6504/10 area. A break of the latter would risk a return to February’s trough of $0.6443.

Both took a hit from a warning by Fed Governor Christopher Waller that there was no rush to reduce U.S. interest rates and fewer cuts might be needed this year given the resilience of the economy.

Data from Australia showed consumers continued to struggle as retail sales edged up 0.3% in February, missing forecasts of a 0.4% gain. Annual growth remained well below population growth, implying sales per capita continue to fall.

“Consumer spending is in the midst of a very weak period, with high interest rate and inflation putting pressure on household finances,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.

“The outlook will improve throughout the year as inflation wanes and real wage growth improves, but momentum in sales will be patchy.”

There were also signs of a cooling in labour demand as job vacancies fell 6.1% in the three months to February.

Futures imply around 68% chance of a first rate cut in August, while a move to 4.10% is almost fully priced for September. The market is pricing in a modest 39 basis points of easing this year, compared to 76 basis points in the United States. 0#RBAWATCH

In New Zealand a survey showed business confidence edged back in March while price pressures eased, adding to the recent run of soft data on the economy.

Markets are pricing in an almost 50% chance the Reserve Bank of New Zealand (RBNZ) could cut rates as early as July, while a quarter-point cut is fully priced for August. 0#RBNZWATCH

The market implies roughly 72 basis points of easing this year, even though the RBNZ has projected no cuts until well into 2025.

Reporting by Wayne Cole; Editing by Stephen Coates

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