The Australian and New Zealand dollars hit multi-month highs on Thursday as a slowdown in U.S. inflation revived the chance of an earlier rate cut there, while bonds got an extra boost from a mixed set of local jobs data.
The Aussie stood at $0.6688 AUD=D3 , having touched a four-month peak of $0.6714 at one stage. It jumped 1% overnight following the U.S. inflation report, to finally clear major resistance at $0.6650.
The kiwi dollar was up at $0.6145 NZD=D3 , after surging 1.3% overnight to a two-month top. It also broke resistance at $0.6084 and now targets $0.6218.
Bonds were a major beneficiary as markets priced in more chance of rate cuts globally, a shift aided by a surprise spike in Australian unemployment to 4.1% in April.
That followed data showing an unexpected slowdown in wages growth for the first quarter, and led markets to price out any chance of a further rate increase from the Reserve Bank of Australia (RBA).
0#RBAWATCH This was a sea change from earlier this month when the probability of a hike had been as high as 40%. Futures now implied around a 50% chance rates could be cut as early as December, and a quarter point reduction in the 4.35% cash rate was fully priced in by next April.
"A number of indicators now suggest the labour market is loosening including today's release," said Belinda Allen, an economist at CBA. "Yesterday's wages data indicated a step down in the pace of wages growth and gives us more confidence that labour demand is easing."
"Both these data points reinforce our central case scenario of a November start data to the RBA's easing cycle."
Three-year bond futures YTTc1 jumped 12 ticks to 96.170, while yields on 10-year notes AU10YT=RR dived to 4.213% after being up at 4.409% at one stage on Wednesday.
