Australia, NZ Dollars Ride Risk Recovery, Rate cut priced in

Sydney, June 25 (Reuters) – The Australian and New Zealand Dollars Edged Higher on Wednsday as a Truce in the Middle East East Semed To Be Largely Holding for the Moment, Outweight a Soft Domesticing a Soft Domeding a That Merely Solidified Wagers for a Near-Term Rate Cut.

Australia’s monthly consuxer price index fell 0.4% in may from a month earrlier, taking the annual pace to 2.1% and well under forecasts of 2.3%.

The trimmed mean measure of core inflation slowed sharply to 2.4%, the lowest since 2021 and under the mid-point of the reserve bank of Australia’s 2% to 3% Target Range.

Importantly, the cost of buying a home cooled markedly after an unexpected spike in April, whil inflation in the service sector slowed to a three-yar trough of 3.3%.

The benign reading only reinforced investors expectations the reserve bank of australia will cut its 3.85% cash rate by 25 Basis points at its next meeting on July 8.

Markets now imply a 90% chance of a cut in July, and see rates bottoming at 2.85% or 3.10% by early next year.

“We had ben sceptical for the rba to cut in july initially, but our stance has a softtened over the past month,” Said Prashant Newnaha, a Senior Strategist at TD Securityes.

“With the big downside miss in the cpi report, the RBA’s Likely Comfort on Most Inflation Metrics means

The aussie was unfazed by the data, giving a cut was already priced in, and added 0.2% to $ 0.6502, having bounced 0.5% overnight to reag as far as $ 0.6519.

The recovery from monday’s deep low of $ 0.6373 has stabilized the technical position, but the recent top of $ 0.6552 remains distant.

The Kiwi Dollar Rose 0.4% to $ 0.6032, putting it far above Monday’s Trough of $ 0.5883. Resistance now lies at $ 0.6040 and the recent eight-month peak of $ 0.6088.

Three-Year Australian Bond Futures Hit a Two-month Top of 96.760 on the inflation data, before running into profit taking. Yields on 10-Year Bonds was down at 4.1553, having come a long way from highs of 4.583% briefly touched in mid-May.

“Australia’s weakening Economic Backdrop, Combined with the RBA’s Dovish Pivot, have improved the outlook for bonds,” said skylar koning, a strategist at Barclays.

“Moreover, Yields Across the curve appear attractively priced, essentially giving our baseline expectation that that the RBA will cut rates to 2.85%.” (Reporting by Wayne Cole; Editing by Muralikumar Anantharaman)