The Australian dollar hit a minor speed bump on Thursday as yet...

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    The Australian dollar hit a minor speed bump on Thursday as yet more domestic data undershot expectations, though it was still holding solid gains for the week on a broadly weaker U.S. currency.

    Its New Zealand neighbour has benefited from a much better run of data recently and got a fresh fillip when the Reserve Bank of New Zealand (RBNZ) announced bank capital requirements that were less harsh than many feared.

    "The finalised RBNZ capital decisions are less onerous on the banking system, than those originally proposed," said Jarrod Kerr, chief economist at Kiwibank.

    "That reduces the likely impact on credit conditions, and therefore reduces the likely need for the RBNZ to cut rates again."

    The kiwi duly outperformed by pushing ahead to a four-month peak at $0.6562 NZD=D3 , giving it gains of 1.9% on the week.

    The Aussie came off to $0.6840 AUD=D3 , from an early $0.6856 top, but found chart support around $0.6835 with more at $0.6821. It remained 1.2% higher for the week so far.

    Australian data extended their run of disappointing outcomes with retail sales going flat in October, when analysts had hoped for a 0.3% gain.

    The country's trade surplus also shrank a third to a surprisingly low A$4.5 billion in October as prices for iron ore came off the boil, a worrying turn for what has been one of the strongest sectors of the economy.

    All this was a challenge to the optimistic picture painted by the Reserve Bank of Australia (RBA) when it skipped a chance to ease policy earlier this week.

    "Given that consumer spending in the September quarter almost stalled - up only 0.1% - despite A$7 billion of income tax cuts, weak October retail sales provide a worrying start to Q4," said NAB economist Kaixin Owyong.

    "The data have been clear and more stimulus is needed. NAB expects the RBA will cut the cash rate to 0.5% at its next meeting in February, and again in June to 0.25%."

    Market pricing implies around a 58% chance 0$YIB: of a cut in February, rising to almost 100% by April. A further easing to 0.25% is put at a 50-50 chance by year end.

    That outlook has seen bonds rally over the past month, though there was a minor dip on Thursday as market worries about the Sino-U.S. trade deal lessened a little.

    Three-year bond futures YTTc1 eased 2 ticks to 99.300, while the 10-year contract YTCc1 fell 4 ticks to 98.9000.

 
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