The Australian and New Zealand dollars drifted lower on Monday ahead of a high-stakes policy meeting from the Reserve Bank of Australia, with markets wagering on the first pause after 10 straight interest rate hikes.
The Aussie slipped 0.2% to $0.6676 AUD=D3 , after finishing the first quarter with a drop of 2%. Support lies at $0.6662 and $0.6625, with resistance around the 200-day moving average of $0.6752.
The kiwi dollar eased 0.5% to $0.6223 NZD=D3 , having also fallen 1.5% for the quarter to as low as $0.6085. It has support at the 21-day moving average of $0.6204, with major resistance at $0.6309.
"Looking to the rest of the week, the RBA and RBNZ meetings will be the key focal point," said Tapas Strickland, head of market economics at National Australia Bank, which tipped the RBA to hike for one final time on Tuesday.
"The risk is the RBA pauses and retains a hiking bias, preferring to err on the side of a more protracted battle against inflation until or unless its hand is forced by the data."
Economists are more split on whether the RBA will hike or not this week, with 14 out of 27 economists polled by Reuters predicting the cash rate to increase by 25 basis points to 3.85%, while the rest forecasted a pause.
Futures, however, have priced in an 87% chance the RBA will stand pat at its April policy meeting on Tuesday with the cash rate at 3.6%, and only a modest risk of a rise at all this year. That was a radical change from early in the month when rates were seen reaching 4.1% or higher.
0#RBAWATCH Data on Monday showed building approvals were still down more than 30% from a year earlier, while the value of home loans were off 33% from their record highs in January.
However, low supply and rising immigration levels are supporting prices, with CoreLogic data showing that prices actually rose 0.6% in March, the first gain in nearly a year.
That would be welcome news to the RBA and raised hopes that the economy is heading to a soft landing, even as interest rates have been raised by a whopping 350 basis points to an 11-year high.
The Reserve Bank of New Zealand (RBNZ) also meets on Wednesday and markets are almost fully priced for another rate rise of 25 basis points to 5.00%.
A further move to 5.25% is expected by July, but investors doubt rates will reach the RBNZ's projected top of 5.5% given the economy is possibly already in recession.
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