Australian and New Zealand Dollars React to US Inflation Data

The Australian and New Zealand dollars maintained their gains on Friday, despite facing weekly losses following unexpected US inflation data. The Australian dollar was steady around $0.6539, rising 0.4% to $0.6553 but still on track for a 0.6% weekly decline. The New Zealand dollar hovered near $0.5999, climbing 0.4% to $0.6015, with a projected 0.2% weekly drop.

The US inflation surprise raised doubts about potential rate cuts in both countries. Market expectations for a Reserve Bank of Australia rate cut have been pushed back to December, with only a 77% chance of a cut this year. Analysts suggest that Australia's journey to achieving target inflation will not be straightforward, predicting a possible rate cut in November.

Australian bonds faced significant weekly losses, with three-year bond futures hitting a low not seen since mid-February. In New Zealand, focus shifts to the upcoming consumer inflation report for insights into the Reserve Bank of New Zealand's interest rate trajectory. Traders, who previously anticipated a rate cut in August, now foresee a move in October, reducing the expected total easing for the year from 60 to 43 basis points post the US CPI data.

In conclusion, the currency markets in Australia and New Zealand are reacting cautiously to global economic indicators, with investors closely monitoring central bank policies and inflation trends to gauge future monetary decisions.