[SYDNEY] The Australian and New Zealand dollars were making another attempt at topside resistance on Tuesday as conflicting comments over White House tariff policies undermined confidence in their US counterpart.
Markets were jolted when US Treasury Secretary Scott Bessent said it was up to China to “de-escalate” the trade war, a reversal from last week when President Donald Trump suggested the US would scale back its tariffs first.
“The implementation of US tariff policy has been erratic and, as a consequence, uncertainty about the business environment is very high,” said Joseph Capurso, head of international economics at CBA.
“While the end-state remains unclear, the significant increase in US tariffs will stunt economic growth in the US and most large economies.”
Data due on Wednesday could show the US economy had already contracted in the first quarter, partly due to a surge in imports ahead of the tariffs.
Investors reacted by pushing the greenback down across the board, lifting the Aussie back to US$0.6429 from a Monday low of US$0.6369. It now faces major resistance around US$0.6439 which defeated repeated attempts to rally last week and a bullish break would open to way to at least US$0.6550.
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The kiwi dollar managed a more modest bounce before selling curbed it at US$0.5963, well short of its recent top at US$0.6029.
Data out of New Zealand suggested the labour market remained subdued and markets were right to price in a 90 per cent chance the Reserve Bank of New Zealand would again cut rates at its next policy meeting on May 28.
“The data shows that jobs were about flat over the March quarter and, in the context of a growing working-age population, that suggests a further rise in the unemployment rate is likely,” said Michael Gordon, a senior economist at Westpac.
Markets are fully priced for the Reserve Bank of Australia to cut the 4.10 per cent cash rate by 25 basis points when it meets on May 20, though inflation figures due on Wednesday might just alter the equation.
Forecasts are for the key trimmed mean measure of core inflation to rise 0.6 per cent in the first quarter, pulling the annual pace down to 2.8 per cent from 3.2 per cent.
That would put it back in the RBA’s 2 per cent to 3 per cent target band for the first time since late 2021 and greatly strengthen the case for an easing next month. REUTERS
