US dollar weakens in early trade

19 Apr 2023 , 09:53 AM

On Wednesday, the Australian and New Zealand dollars maintained their gains as markets debated the future of interest rates ahead of some crucial inflation reports.

Australian dollars strengthened to $0.6735 after rising 0.4% overnight. Support is at $0.6681, and resistance is at $0.6750, just before the most recent seven-week high of $0.6808.

Inching up from the week’s low of $0.6162, the kiwi dollar is now at $0.6213. Prior to its most recent high of $0.6314, near-term resistance is located at $0.6225.

Following the release of the RBA’s April meeting minutes, the risk that rates will be raised in May has increased.

Although the likelihood of a quarter-point increase in the 3.6% cash rate has risen this week and analysts are typically more hawkish, futures still only suggest a 20% chance of such a move.

On April 26, the consumer price report for the first quarter will be released. This data will be closely watched, especially the trimmed mean, which stunned the market with a leap to 6.9% in the previous quarter.

The CPI data for New Zealand, which is due on Thursday, may provide a hint as to the result, but the picture has been complicated by recent natural disasters and a sharp increase in food costs.

As a result, median predictions call for the CPI to grow 7.1% annually, just slightly slower than the sizzling 7.2% rate of the December quarter. Core inflation measures are anticipated to remain stubbornly high, exceeding 6%.

Market expectations suggest that the Reserve Bank of New Zealand (RBNZ), which has already tightened by 500 basis points, will increase rates by a quarter point to 5.5% in May.

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