The Australian and New Zealand dollars inched higher on Thursday with the market relieved the first stage of the Sino-U.S. trade deal had been sealed but wary that months more wrangling lay ahead.
The Aussie edged up 0.1% to $0.6909 AUD=D3 having been as low as $0.6878 at one stage on Wednesday. Resistance lies around $0.6920 with support at the 200-day moving average of $0.6888.
The kiwi dollar firmed to $0.6631 NZD=D3 , after bouncing from support at $0.6586, and now faces resistance at $0.6655.
The United States and China signed a Phase 1 deal on Wednesday that will roll back some tariffs and boost Chinese purchases of U.S. products, but leaves a number of sore spots unresolved.
Vice President Mike Pence later said discussions had already begun on a Phase 2 agreement, which analysts fear will be even more difficult and drawn out than the first round.
"Fundamentally, this deal does little to alter either the U.S. or Chinese economies, and the key issues in the U.S.-China economic relationship remain unaddressed," said Hannah Anderson, global markets strategist at J.P. Morgan Asset Management.
"While markets seemed to take this deal as a risk-on signal, we should all be aware that headlines about trade are going to be a constant feature of 2020."
Domestically, Australian data showed new home loans rose a solid 1.8% by value in November as a revival in prices fuelled demand by owner-occupiers and investors.
House prices have been the clearest winner from the Reserve Bank of Australia (RBA) three rate cuts last year with gains in Sydney and Melbourne running at an annualised pace above 20%.
The rest of the economy, however, has struggled with consumers in particular reluctant to spend amid miserly wage growth and high debt levels.
Markets have thus priced in around a 46% chance
0#YIB: the RBA will ease again at its next policy meeting on Feb. 4, and a 90% probability of a move by May.Crucial will be the December jobs report due out next week and whether it shows continued employment growth, or a pullback, from November's surprisingly strong 39,900 jump.
Any weakness will ramp up the chance of a near-term cut given the RBA Board highlighted the risks to employment at the last meeting in December.
Yields on three-year bonds AU3YT=RR are down at 0.758%, dead in line with the 0.75% cash rate but above the all-time low of 0.567% hit in October.
The three-year bond future YTTc1 gained 2.5 ticks on Thursday to 99.230, while the 10-year contract YTCc1 rose 3.5 ticks to 98.8050.
