Australia, NZ dlrs overshadowed by downbeat domestic data

  • 1/18/2022
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SYDNEY, Jan 18 (Reuters) - The Australian and New Zealand dollars were left adrift on Tuesday as downbeat domestic data put a question mark over expectations for strong economic recoveries this year. The Aussie was stuck at $0.7215 , having hardly moved overnight during a U.S. holiday. Last week"s failure to sustain a two-month top of $0.7314 has clouded the technical outlook, though it does have support at $0.7196 and $0.7130. The kiwi dollar was flat at $0.6795 , having found some support at $0.6788. That was well short of last week"s top of $0.6890 and around the middle of a narrow trading range that has lingered since late November. Both currencies faced disappointing domestic data, with Australian consumers cowed by the rapid spread of coronavirus and record deaths. read more In New Zealand, an influential survey showed business confidence last quarter was bruised by a combination of coronavirus restrictions and rising costs. read more In a worrying development for inflation some 52% of respondents raised prices in the quarter, the highest since 1987. "Inflationary pressures were evident and appear to be accelerating," said Jarrod Kerr, chief economist at Kiwibank. "A closed border means it"s becoming increasingly difficult to find skilled staff, and an exceptionally tight labour market is driving up wages." Kerr said the results reinforced the case for more monetary tightening from the Reserve Bank of New Zealand (RBNZ) and he expected another increase of 25 basis points at the next policy meeting on Feb. 23. The market is fully priced for a February move to 1% and for rates to reach 2% by October. The two increases already delivered, coupled with a tightening of mortgage lending rules, has already taken a lot of the heat out of the housing market, with prices falling in December for the first time in 20 months. Michael Gordon, acting chief economist NZ for Westpac, said a recent sharp increase in fixed-term mortgage rates and tighter loan-to-value limits could see prices turn lower faster than previously expected. "That in turn could have implications for the strength of consumer demand this year, and the extent of rate hikes that will be needed to keep inflation in check," he added.

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