Aussie dollar jumps, kiwi slips after inflation data

January 25, 2023 0 Comments

The Australian dollar rose to a five-month high on Wednesday after warmer-than-expected inflation data, while the kiwi slipped after New Zealand’s fourth-quarter inflation came in lower than its central bank forecast.

The euro held at a nine-month high against the dollar as traders assessed better growth prospects for the euro zone amid growing signs of a US recession.

The Australian rose 0.66% to $0.7092, its highest since August, after shock inflation hit a 33-year high in case the Reserve Bank of Australia continues to raise interest rates.

Meanwhile, the kiwi fell nearly 0.6% to $0.6469 after New Zealand’s fourth-quarter annual inflation of 7.2% came in below its central bank’s forecast of 7.5%.

“The main message we’re taking from this is that we think we’ve now seen the worst of inflation, and we think inflation has peaked,” said Jarrod Kerr, chief economist at Kiwibank.

“We’re expecting the cash rate in New Zealand to be higher than 5%, not 5.5%, which is what the Reserve Bank (of New Zealand) is telling us they’re going to do, and the rate market will react to that change.” Giving. In the scene.”

In other currencies, the euro held steady at $1.0888, near Monday’s nine-month high of $1.0927, as a surprisingly resilient euro zone economy and tougher rhetoric from European Central Bank (ECB) policymakers supported the single currency.

Euro zone business activity made a surprise comeback with modest growth in January, data showed Tuesday, indicating the bloc’s recession may not be as deep as feared.

Sentiment was also supported by expectations of a further rate hike from the ECB. Policymakers are committed to controlling inflation, but are divided on the size of steps beyond February’s potential half-percentage point increase.

In the United States, a gloomy outlook is emerging as signs of an economic slowdown, which resulted from the Federal Reserve’s aggressive rate hikes last year, have begun to appear.

US business activity contracted for a seventh straight month in January, although declines in both the manufacturing and services sectors slowed for the first time since September.

Against a basket of currencies, the US dollar index gained 0.01% to 101.92, not far from last week’s nearly eight-month low of 101.51.

“[The data]just confirms that Europe, for one, has resilience … and the challenges they have in terms of energy are not as injurious as some had expected, while at the same time, in the U.S. The recession, in terms of activity, appears to be broader,” said Rodrigo Catril, a currency strategist at National Australia Bank.

Sterling slipped 0.15% to $1.2322, while the Japanese yen was last bought at 130.24 per dollar.

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