SYDNEY: The Australian and New Zealand dollars were on the front foot again on Tuesday as a revival in risk sentiment and a sudden pullback in their US counterpart saved them from a damaging breach of chart support.
Major stock markets shrugged off the US strike on Venezuela to power higher overnight, while the bullish mood spread to commodities, sending copper to another record peak.
A surprise slip in the ISM survey of US manufacturing also stirred unease ahead of the crucial December payrolls report, pulling down Treasury yields and the greenback.
That setback saw the Aussie steady at $0.6711, having been as low as $0.6663 at one stage overnight.
A break of the recent 14-month top at $0.6727 would open the way to bull targets at $0.6793 and $0.6943.
The kiwi dollar stood at $0.5788, after rallying from a trough of $0.5745 the previous session.
That still left it well short of the recent peak at $0.5853, but support looks solid around $0.5740.
Domestically, the focus is on Australian consumer price data for November due Wednesday, where an annual increase of 3.65% is expected, only marginally down from 3.8% in October.
The trimmed mean measure of core inflation is seen stuck at 3.3%, an outcome which would stoke speculation the whole fourth quarter will also show an uncomfortably high result.
The Reserve Bank of Australia (RBA) has already warned it might have to hike the 3.6% cash rate if inflation does not cool, setting up a tight call for its next meeting in February.
“For the RBA to remain on hold, we think we would need CPI data to be softer than expected and point to little to no persistence in recent stronger outcomes, and/or a surprising loss of momentum in activity or the labour market,” argued Taylor Nugent, a senior economist at NAB.
“We expect a 25bp hike in February and May to 4.1%, a recalibration, rather than the beginning of a significant tightening cycle.”
Markets currently imply only a 30% chance of a February hike, suggesting scope for a sharp move should the November CPI surprise on the upside.
Investors also assume any tightening cycle will be shallow, with just 37 basis points of hikes priced in for this year.
American Dollar Exchange Rate