The Australian and New Zealand dollars started the week on the right foot, as a key US inflation reading cooled, boosting bets on a rate cut, but they lost ground against a buoyant euro after the first round of French elections.
The Aussie rose 0.1% to $0.6672, after gaining 0.4% last week to $0.6689, as benign US PCE data kept alive the prospect of a September rate cut…
The dollar price is still facing the resistance of 67 cents, while support is at $0.6576, a range it has held for the past six weeks.
The New Zealand dollar gained 0.3% to $0.6102, after bouncing off its 200-day moving average of $0.6069 on Friday to break its recent downtrend. It fell 0.5% last week.
The two currencies lost ground against the euro, which recovered somewhat from recent sell-offs, after the first round of French elections on Sunday showed Marine Le Pen’s far-right National Rally (RN) party has won the greatest number of votes, but with a lower share than initially predicted by some polls.
The euro gained 0.3% to 1.6107 Australian dollars, moving away from a one-year low, while it rose 0.1% to 1.7611 New Zealand dollars.
The two antipodes also hit new highs on the battered yen. The kiwi hit a 34-year high at 98.29 yen, while the Aussie scaled another 17-year high at 107.57 yen.
In Australia, house prices continue to hit record highs, with a further 0.7% growth last month, adding to household wealth.
The Commonwealth Bank of Australia on Monday revised up its forecast for house prices this year to 7%, from 5% previously, noting that risk still remains on the upside.
“The near-term risk of rising interest rates would limit upside risks to home prices and even slow the pace of growth,” said Belinda Allen, senior economist at CBA.
Combined with sticky inflation, markets are betting there is a 65% chance the Reserve Bank of Australia will have to hike the current cash rate of 4.35% in August, which has supported the ‘Aussie in recent weeks’.
The RBA will release the minutes of its June policy meeting on Tuesday and retail trade data is due on Wednesday.
The tax cuts, designed to give all Australian taxpayers more money to cope with rising living costs, came into force on Monday.
