The Australian and New Zealand dollars were leaning on support on Thursday as Chinese trade data proved too mixed to provide any impetus, while bonds extended their blistering rally as a dive in oil prices promised to drag on inflation.
While Chinese exports did edge past forecasts, imports disappointed and the Asian giant is the biggest buyer of Australia's resource exports.
That left the Aussie limping at $0.6535 AUD=D3 , having failed to sustain a bounce to $0.6598 the previous session. A break of chart support at $0.6530 would risk a retreat to at least $0.6480.
The kiwi dollar slipped to $0.6119 NZD=D3 , after also failing to maintain a rally to $0.6177, It has support around $0.6090.
Bonds, on the other hand, were in a boisterous mood as oil prices hit six-month lows, sending three-year futures YTTc1 to their highest since mid-September at 96.160. The contract is now up a steep 22 ticks so far this week.
Yields on 10-year Australian government bonds AU10YT=RR were down as much as 28 basis points on the week to touch a three-month low of 4.230%.
Markets have seen a startling reversal in Australian interest rate expectations in recent days with futures now pricing out any risk of another hike, when it had been an odds-on chance not long ago.
Instead, the market now implies there is a 60% chance of a rate cut in June and has 36 basis points of easing priced in for all of 2024.
0#RBAWATCH The shift has come despite the Reserve Bank of Australia (RBA) leaving the door open to a hike at its December policy meeting this week.
A soft reading on economic growth for the third quarter had also shown household finances under intense pressure from high borrowing costs and a rising tax burden.
"We see economic growth undershooting the RBA's projections in 2024, which is also why we expect interest rate cuts to start from mid-2024," said Diana Mousina, deputy chief economist at AMP Capital.
"But we are also mindful that the RBA's hawkishness in recent months means that there could be the chance of another hike in February, following the December quarter inflation figures in late January."
New Zealand markets are fully priced for a first rate cut in August, even though the country's hawkish central bank has warned it might well have to hike again.
0#RBNZWATCH
