SYDNEY: The Australian and New Zealand dollars found some footing on Friday as the Israel-Iran conflict continued but did not escalate to US involvement, offering a welcome reprieve to risk assets.
Markets were left in geopolitical limbo after President Donald Trump put off a decision on whether to strike Iran for two weeks, while the two sides traded more missile attacks.
Still, the lack of an immediate US attack was enough for the Aussie to edge up 0.1% to $0.6487, having dived as deep as $0.6446 overnight.
Support lies at $0.6408 with resistance at the recent seven-month high of $0.6552.
The kiwi dollar was hanging on at $0.6000, having slid as far as $0.5959 on Thursday as a break of support sparked stop-loss selling.
That was well off the eight-month top of $0.6088 hit early in the week and risked a retreat to $0.5926.
A mixed Australian jobs report had little impact on market expectations for a quarter-point rate cut from the Reserve Bank of Australia (RBA) in July, which is priced at a 75% chance.
“We remain comfortable with our view that the RBA’s next rate cut is most likely to occur in August,” Westpac analysts said in a note.
“The RBA have made it clear they want to adjust policy in a cautious and predictable manner, warranting another quarterly reading on inflation and time to assess global conditions.”
Inflation figures for the second quarter are not due until late July. Across the Tasman, economic growth rebounded a little faster than expected in the first quarter, but business investment was disappointingly weak.
Markets still see scant chance of the Reserve Bank of New Zealand cutting its 3.25% rate in July, though the probability of an August move is above 60%.
Australia, NZ dollars take collateral damage from Mideast conflict
“We now expect the RBNZ to pause the easing cycle at July’s meeting, instead of cutting,” said Andrew Boak, an economist at Goldman Sachs.
However, given the large amount of slack in the labour market, Boak saw more scope on the downside for rates and forecast three more quarter-point easings to 2.5%, well below the market’s 3.0% floor.
American Dollar Exchange Rate