Key Takeaways
- The Australian dollar gained 0.2% to $0.6994, ending a four-week losing streak.
- Investors await RBA minutes and jobs data to gauge future interest rate movements.
- The New Zealand dollar remains under pressure, down over 6% from its August peak.
The Australian dollar strengthened on Monday, rising 0.2% to $0.6994, marking an end to a four-week decline. This gain came after the currency had broken a four-week losing streak, rising 0.4% last week. The technical outlook for the Australian dollar improved slightly, moving above the seven-day moving average of $0.6972.
Meanwhile, the New Zealand dollar struggled, remaining flat at $0.5607 after seven consecutive weeks of decline. It has fallen over 6% from its peak in mid-August, with support at $0.5578. Analysts at ANZ, David Croy, noted that the New Zealand dollar has been the worst performer among G10 currencies, with the New Zealand dollar trade-weighted index (TWI) at levels not seen since 2011.
The Reserve Bank of New Zealand (RBNZ) is expected to make a decision on interest rates at its October 28 meeting. Swaps currently imply a 58% chance of a quarter-point rise to 3.0% before the general election on November 7. The opposition Labour Party has pledged to reintroduce maximum sustainable employment to the central bank’s objective, alongside price stability.
The New Zealand dollar's performance has been influenced by the Reserve Bank of Australia's (RBA) rate hikes. The Aussie traded at NZ$1.2447, just below a 13-year peak of NZ$1.2488. The RBA will release the minutes of its latest meeting on Tuesday, with the key question being whether policymakers believe they have done enough to tame inflation after four rate hikes this year to a 15-year high of 4.6%.
Investors are closely watching the Australian jobs report for September, due on Thursday. Forecasts predict a rise of 20,000 jobs, with the unemployment rate likely staying steady at 4.6%, a five-year high. A weak result could ease concerns about the inflationary impact of a tight labour market and reduce the need for a fifth rate hike this year. Markets currently imply around a 30% chance of a hike in November, rising to 52% for December.
The Reserve Bank of Australia's next move will be influenced by the September jobs report and the RBA's latest meeting minutes. The central bank's decision will be crucial in determining the future path of interest rates and the performance of the Australian dollar.
