US Markets

Australia, NZ dlrs stuck in a news lull, eye resistance

Credit: REUTERS/Thomas White

The Australian and New Zealand dollars were becalmed on Thursday as a lack of progress on either Brexit or the Sino-U.S. trade dispute sucked all the momentum out of the market.

By Wayne Cole

SYDNEY, Oct 24 (Reuters) - The Australian and New Zealand dollars were becalmed on Thursday as a lack of progress on either Brexit or the Sino-U.S. trade dispute sucked all the momentum out of the market.

The Aussie AUD=D3 was idling at $0.6854, having shied away from tough resistance at the September top of $0.6895. Support comes in at $0.6834 and $0.6810.

The kiwi dollar NZD=D3 was steady at $0.6418, having again failed to clear its September high of $0.6450. Near-term support lies at $0.6386.

A dearth of domestic data added to the somnolent tone with the next major Australian release being third-quarter consumer prices on Oct. 30.

Justin Smirk, a senior economist at Westpac, expects a pick up in headline consumer price inflation to an annual 1.8% pace but for the key core measure to slow a tick to 1.3%.

That would mean core inflation had been running below the floor of the Reserve Bank of Australia's (RBA) 2-3% target band for almost four years, a major reason markets are betting on at least one more rate cut.

"Competitive disinflationary pressure in consumer goods is limiting the pass through of the weaker Aussie, though it is having some impact," said Smirk.

"Given this we find it hard to envisage core inflation breaking higher any time soon, let alone returning to the mid-point of the 2% to 3% target band."

Futures are pricing in a slim 16% chance 0#YIB: of a quarter-point cut at the RBA's next meeting on Nov. 5, rising to around 50% in December and 82% for February next year.

That outlook is helping keep bond yields not far from record lows. Three-year bond yields AU3YT=RR stand at 0.74% compared to 1.83% at the start of this year.

The three-year bond future YTTc1 added 1.5 ticks on Thursday to stand at 99.275, while the 10-year contract YTCc1 gained 1 tick to 98.9050.

There was a rare event in the government's regular debt auctions when a sale of Treasury Notes drew bids for less than the amount offered, a miss that last happened back in 2002.

The auction of A$1 billion ($684.50 million) of short-term notes attracted bids worth just A$936 million, resulting in a bid-to-cover ratio of 0.9263.

A ratio under 1 is exceptionally rare for Australian government debt, which carries the top triple-A credit rating and usually draws more than enough demand.

(Editing by Shri Navaratnam)

((Wayne.Cole@thomsonreuters.com; 612 9321 8162; Reuters Messaging: wayne.cole.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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