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The Australian and New Zealand dollars have held firm despite the US-China tariff truce and positive job data, as markets anticipate interest rate cuts.
What does this mean?
After a week unsettled by a US-China tariff truce, the Australian and New Zealand dollars stayed stable, with the Aussie at $0.6405 and the Kiwi a bit lower at $0.5866. Investors expect interest rate cuts from the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ). Despite strong jobs data, the RBA is likely to cut rates by 25 basis points from 4.10% on May 20, as supported by 42 of 43 surveyed economists. Forecasts now suggest a total reduction of 75 basis points for the year. Similarly, the RBNZ is predicted to lower rates to 3.25% in its May 28 meeting, with a potential floor of 3.0% predicted by economists.
Currency markets are tense, scrutinizing the effects of looming rate cuts by Australia and New Zealand's central banks. The Aussie dollar might navigate beyond $0.6350 or $0.6515, with pivotal support levels providing insight into the Kiwi's path. Investors keep a keen eye on these changes to gauge market stability.
The bigger picture: Gauging global impacts.
Globally, markets respond to easing tensions from US-China trade discussions, reducing financial risks. This shift allows central banks to prioritize domestic economic issues, making the interplay between global policies and local economic strategies key to understanding future global economic shifts.