The Australian and New Zealand Dollars continued their recent rally on Monday, as the US Dollar came under pressure from expectations of rate cuts, while disappointing local data hinted at another quarter of sluggish growth for Australia.
The Australian Dollar rose 0.2% to $0.6549, reaching a near three-week high and marking its fifth consecutive gain. Traders are now watching key resistance levels at $0.6550 and $0.6568 following a 1.7% increase in August.
The New Zealand Dollar also rose 0.2% to $0.5908, reaching its highest level in nearly two weeks after a 0.4% gain last week. However, it remains near the lower end of its recent trading range between 58.5 and 61 cents.
Both the Australian and New Zealand Dollars held up fairly well against the US Dollar following Friday’s inflation data, which came in line with expectations, keeping market bets on a Federal Reserve rate cut this month largely intact, with about 90% probability priced in, Reuters reports.
“There is a risk weak labour market data causes participants to price some chance of a 50 bp cut before year-end, weighing on the USD,” according to Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
“AUD/USD can lift above 0.6600 this week if the USD weakens as we expect,” he added.
Data revealed that Australian business inventories increased by 0.1% in the second quarter, suggesting a drag of roughly 0.4 percentage points on Q2 GDP, scheduled for release on Wednesday.
Economists had been expecting a 0.5% quarterly growth, which would raise annual growth to 1.6% from 1.3% in the first quarter.
“Today’s data points to some downside risk to our current forecast for Q2 GDP,” stated Pat Bustamante, a Westpac senior economist.
“The wages data suggests Australia’s economic recovery lost momentum over the first half of 2025.”
However, housing prices surged in August, reaching a new record high as the central bank’s third rate cut boosted buyer demand. Meanwhile, building approvals declined in July following a strong performance in June.
Furthermore, Reserve Bank of Australia Governor Michele Bullock is set to give a speech on Wednesday discussing technology and the future of central banking, while Deputy Governor Andrew Hauser will speak to Reuters in an interview on Thursday.
Whereas the New Zealand government has revealed that certain wealthy foreign investors will now be permitted to purchase or construct homes valued at over NZ$5 million.