The Australian dollar hovered near one-week highs on Wednesday as traders pared the chance of an October rate cut after the country's second quarter economic growth matched expectations while its New Zealand cousin also inched up.
The Aussie AUD=D4 climbed to $0.6783 after official data showed the country's A$1.95 trillion ($1.32 trillion) economy expanded 0.5% in the quarter-ended June, same as the previous three-month period and in-line with forecasts.
Annual gross domestic product (GDP) growth came in at 1.4%, again meeting expectations.
The figures mean the Reserve Bank of Australia (RBA) will probably wait to see the impact of its back-to-back rate cuts in June and July to a record low 1% before moving in October.
"The RBA could also draw on the pick-up in Sydney and Melbourne housing markets and upward revision to Q1 GDP from 0.4% to 0.5% as reasons to hold fire at least in October," said Citi economist Josh Williamson.
Futures
0#YIB: are now putting a 50-50 chance of an October move while a 25-basis-point cut to 0.75% is fully priced in for November. Prior to the data, an October cut was almost fully priced in."By November, the RBA will also have two more labour market and retail trade reports to inform their decision making," Williamson added.
November "remains our central estimate for the next likely policy change."
Across the Tasman, the New Zealand dollar NZD=D4 gained 0.6% to a one-week high of $0.6350 from a recent four-year low of $0.6270.
Helping the antipodean currencies was a sharp decline in the greenback after U.S. manufacturing activity contracted for the first time in three years in August. New orders and hiring skidded as the country's tariff dispute with China hurt business confidence.
The data triggered a rally in bond prices, sending 10-year Treasury yields US10YT=RR to the lowest since 2017 as investors worried about a sharp U.S. economic slowdown or even a recession.
A sullen greenback gave ground to the Aussie and the kiwi which were among the best performers overnight.
New Zealand government bonds
0#NZTSY= were barely changed. Australian government bond futures were mixed, with the three-year bond contract YTTc1 down 2 ticks at 99.28. The 10-year contract YTCc1 rose 1.5 ticks to 99.07.($1 = 1.4806 Australian dollars)
