Australia dollar undermined by fading rate hike chances | World News

SYDNEY, – The Australian dollar was nursing losses on Wednesday after the country’s central bank quashed market talk of a near-term rate hike, although it also didn’t hold out much chance of a cut for months to come.

The Reserve Bank of Australia’s belief that rates were at the right level for now pulled bond yields lower and led futures to slash the probability of a rate rise to 13%, from 40% ahead of the decision.

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“It all implies the hurdle to another hike could be higher than markets have been expecting,” said Adam Boyton, head of Australian economics at ANZ.

“We continue to favor November for the start of the easing cycle, although the risks remain skewed towards that being delayed into 2025 and being shallower than we are forecasting, and we are only expecting three rate cuts in total.”

Indeed, markets imply little chance of a cut until April next year and have only one quarter-point easing priced in by October.

That is a markedly more hawkish outlook than for most other major central banks. The Federal Reserve is tipped to start cutting in September and futures imply 43 basis points of easing by the end of this year.

Markets have 71 basis points of easing priced in for the European Central Bank this year, and 52 basis points for the Bank of England.

That divergence offered the Aussie some support around $0.6575, after Tuesday’s retreat from $0.6650 resistance, but the immediate bias was to the downside.

There is more support around $0.6550, while $0.6650 has become a major technical barrier.

The kiwi dollar was a bystander to most of this, holding at $0.5990 and well above last week’s low of $0.5875.

Australian 3-year bond futures edged up another tick to 96,010, on top of an 11-tick rally on Tuesday.

Yields on 10-year bonds are down 17 basis points for the week so far at 4.25%, widening their discount to Treasuries to 20 basis points.

There are no major economic data due from either Australia or New Zealand for the rest of this week, with the next notable releases being Australian wage figures on May 15.

Offshore, Chinese trade figures on Thursday could provide some direction, as might a Bank of England policy meeting the same day.

This article was generated from an automated news agency feed without modifications to the text.

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