The Australian and New Zealand dollars largely held their gains on Monday, following a dovish shift by the US Federal Reserve that weakened the dollar and provided support to both currencies. Investors remain cautious, balancing expectations of future rate cuts against ongoing economic uncertainties.
The Aussie slipped 0.1% to $0.6485, after rallying 1.1% on Friday from a two-month low of $0.6415. Analysts say the 65-cent level acts as strong resistance, and the currency may face downward pressure if upcoming economic data disappoints.
Meanwhile, the New Zealand dollar eased 0.2% to $0.5856, after rebounding 0.9% on Friday from a four-month trough near 58 cents. Despite the recovery, the kiwi ended last week with a 1% decline, reflecting market concerns over further stimulus measures.
Retail sales data from New Zealand showed a 0.5% increase in the June quarter, signaling recovery in consumer spending. Economists say the full impact of interest rate cuts over the past year is yet to be felt and could continue supporting growth.
The Reserve Bank of New Zealand also proposed easing lenders’ capital requirements to improve fund availability and reduce borrowing costs. Investors are pricing in at least two more rate cuts, expecting the cash rate to drop from 3% to 2.5% by early next year.
In Australia, the Reserve Bank will publish the minutes of its last policy meeting on Tuesday, where officials voted to cut interest rates by a quarter-point to 3.6%. Analysts warn weaker iron ore prices and soft inflation data could pressure AUD/USD further in the coming weeks.
Market experts believe AUD/USD will initially benefit from reassessment of US rate cuts this week. However, the currency pair is expected to face a gentle downward trend, influenced by slower economic growth and global commodity price movements.