Antipodeans Make Progress as Market Awaits US Inflation Data

The Australian and New Zealand dollars maintained recent gains on Thursday. It hovered at multi-week highs, in keeping with investors’ recent shift to riskier assets such as equities. However, currencies were little moved ahead of US inflation data later in the day.

The Australian dollar was last trading at $0.7174. It wasn’t far from the previous day’s high of $0.7194, close to a three-week high.

On Wednesday, the New Zealand dollar was trading at $0.6682, down from a two-week high of $0.66975. The safe-haven yen was at 115.61 per dollar. It tested the weak end of its current range. Moreover, it was also dragged down by better risk sentiment. After a turbulent two weeks, the dollar index held at 95.561, having moved little this week.

Economists Predict

Surveyed economists predicted a 0.5 % month-over-month gain in January and a 7.3 % year-over-year increase. Investors question if a higher CPI print will compel the Federal Reserve to act quicker and harder with policy tightening, given that the Fed is already concerned about rising inflation. The Fed should raise interest rates by 25 basis points (bps) during its March meeting, with others speculating on a 50-bps hike.

Loretta Mester, president of the Cleveland Federal Reserve, said on Wednesday that she didn’t see a compelling argument for starting with a 50-basis-point hike and that rate hikes beyond March would depend on the intensity of inflation how much it moderates or continues.

Government bond rates in the United States and Europe have been climbing as expectations of rate hikes have grown but were calmer on Wednesday and Thursday mornings. Yields on US benchmark 10-year notes were last at 1.9285 %, down from 1.970 % on Tuesday, a 27-month high.

The euro was trading at 1.1423. It dropped slightly this week after ECB President Christine Lagarde stated on Monday that no more tightening was required, assuaging concerns about rate hikes this year. The value of the pound stayed unchanged at $1.353. Bitcoin was a tad weaker in the cryptocurrency sector, hovering at $44,200, barely off Tuesday’s five-week high.

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