The Australian and New Zealand dollars have struggled, with both hitting new lows as a key employment report looms, one that is expected to play a big role in shaping market expectations for future interest rate decisions. The Aussie is trying to get its footing around the $0.6375 mark, whereas the Kiwi stays under pressure and even managed to sink to a one-year low in value. With important labor market data pending for both countries, prospects for either currency remain dicey for now, as analysts wait to see how economic data will influence future monetary policies.
Key Takeaways
Aussie Dollar Weakness: The AUD hit a fresh four-month low of $0.6363, with support at $0.6347 and resistance at $0.65.
Kiwi Dollar Struggles: The NZD hit a one-year low of $0.5789, with support at $0.5771.
RBA and Interest Rate Decisions: The Reserve Bank of Australia left rates unchanged at 4.35%, but revised its policy stance in such a way that increased expectations for rate cuts going into the future.
Australian Employment Report: Australian employment data is scheduled for Thursday and may impact the timing of future rate cuts, as forecasts indicate a slight increase in jobs and a minor increase in unemployment.
Market Sentiment: Global market sentiment is cautious and is influenced by external factors, such as fiscal policy in China and possible changes in the dynamics of the global economy. These factors are impacting the AUD and NZD.
The Aussie and Kiwi Dollar-Current Struggles
AUD: Navigating Uncertainty Amid Economic Shifts
The Australian dollar has certainly had its fair share of headwinds in recent weeks. After an overnight decline of 1%, the AUD hit a fresh four-month low of $0.6363; support was seen at $0.6347. Resistance at $0.65 is difficult to break for the currency. Adding to the uncertainty for the economy in Australia was the decision by the RBA to leave rates at 4.35%, with softened rhetoric regarding restrictive policy.
NZD: New Lows Ahead of Critical Data
Similarly, the New Zealand dollar (NZD) has not been immune to economic challenges. The currency fell 1.1% overnight, hitting a one-year low of $0.5789. Support is close at $0.5771, and any further dip below this could lead to testing lows not seen since November 2022. The weakening of the Kiwi can be attributed to global market dynamics and internal factors like domestic economic concerns.
The Impact of Upcoming Employment Data
RBA's Tightrope: Balancing Data with Future Policy Decisions
The employment report for October takes on heightened importance now that the RBA has flipped to a more dovish bias. Expectations are set for a 25,000 job gain and the unemployment rate to tick up slightly to 4.2% from 4.1%. Since Australia's labor market has consistently outperformed expectations over the past six months, a soft surprise could quicken expectations for a rate cut as early as February 2025.
Market Implications: Changes Expected to Come from the Data
The jobs report may hold the key to the RBA's next moves. A better-than-expected outcome could take some pressure off the Aussie, while a weaker-than-expected report could reinforce expectations of future rate cuts and weigh further on the currency.
Conclusion: Cautious Outlook for the Aussie and Kiwi Dollars
The Australian and New Zealand dollars are under intense pressure, with both currencies trading near critical levels as major economic data approaches. Given that the RBA is focused on the labor market, the outcome of Thursday's employment report will be a critical factor in the future direction of the Aussie and Kiwi dollars. Until then, the market will be quite cautious, and it will be mostly influenced by external factors, such as global fiscal policies and economic uncertainty.
Grave attention will be paid to labor market data from now on, as any surprises may lead to further volatility in AUD and NZD exchange rates.
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