The Australian and New Zealand dollars nudged higher on Friday as markets priced in early rate cuts in the United States and Europe, but little in the way of policy easing at home.
The Aussie edged up to $0.6612 AUD=D3 , after touching a four-month high of $0.6676 earlier in the week. The currency gained more than 4% over November and has support at the 200-day moving average of $0.6580.
The kiwi dollar held at $0.6164 NZD=D3 , near a four-month peak of $0.6207, having climbed 5.7% in November. It has support around $0.6123 and $0.6090.
Both gained on the euro after surprisingly soft readings on EU inflation stoked wagers of early and aggressive rate cuts by the European Central Bank (ECB). The euro was down at A$1.6475 EURAUD= , having hit a seven-week low of A$1.6435 overnight.
Benign data on U.S. inflation also reinforced market expectations for rate cuts from the Federal Reserve, with a first move fully priced in for May. FEDWATCH
Investors are nowhere near as dovish on Australia as futures
0#YIB: imply little chance of a cut until December next year, and a near 50-50 possibility of a further hike.0#RBAWATCH The Reserve Bank of Australia (RBA) holds its monthly policy meeting on Dec. 5 and is forecast to stay on hold given it hiked to a 12-year high of 4.35% just a month ago.
Yet policymakers have sounded decidedly hawkish on inflation and are likely to keep a tightening bias in its post-meeting statement.
"We do not expect the RBA to lift its cash rate again this cycle, although one more hike in H1 2024 cannot be ruled out," said Paul Bloxham, head of Australian economics at HSBC.
"However, we now think that RBA rate cuts will take longer to arrive than previously thought," he added. "We shift our view and see the RBA on hold through 2024 - previously we had cuts from Q324 - later than the house view for the cuts by the Fed and ECB."
If market pricing on those diverging policy outlooks proves anywhere near correct, rate differentials will move sharply in the Aussie's favour over 2024.
The same is true for the kiwi, with the Reserve Bank of New Zealand (RBNZ) this week warning a further hike might be necessary and projecting no easing at all for next year.
Speaking to Reuters on Friday, RBNZ deputy governor Christian Hawkesby kept to the hawkish theme, saying stubborn inflation meant there was little room for error.
Markets are not entirely convinced the RBNZ will need to be so aggressive and have a first rate cut priced in for August, with 38 basis points of easing implied for 2024.
0#RBNZWATCH
