SYDNEY, Sept 5 (Reuters) – The Australian and New Zealand dollars continued the week’s zig zag pattern on Friday, testing the downside as investors pared short greenback positions ahead of a U.S. jobs report that may make or break the case for a rate cut this month.
Markets are 98% priced for a Federal Reserve easing, making them vulnerable to any upside surprise on payrolls.
At home, Australian economic data has generally beaten forecasts this week and led investors to pare back expectations for future policy easing from the Reserve Bank of Australia.
Markets imply an 80% chance of a quarter point cut in the 3.60% cash rate in November, compared to 100% at the start of the week. Some 47 basis points are priced in, implying a floor is not far away at 3.10%. “The drivers of household consumption continue to look brighter, and sentiment has improved, and we expect the RBA to cut the cash rate once more in November,” argues Lucinda Jerogin, an economist at CBA.
“It would take a considerable deterioration in the labour market and an uneasy hand over from the public sector driving growth to the private sector to see additional easing in 2026.”
The run of upbeat data provided support for the Aussie at $0.6525, up 0.1% after losing 0.4% overnight. That puts it in the middle of the week’s $0.6482 to $0.6558 range.
Analysts at ANZ cautioned that should the labour market remain resilient and further strength in consumer spending emerge, the RBA might be done.
“We still think a rate cut in November is more likely than not; but the GDP figure increases the chances of there being no rate cut in November or, indeed, at all, from here,” said Adam Boyton, head of Australian economics at ANZ.
The kiwi dollar was 0.2% higher at $0.5857 but has had less luck with a 0.6% fall overnight to notch a weekly trough of $0.5833. A break of that would open the way to the August low of $0.5800, while resistance is up at $0.5889.
It has been on the defensive since the Reserve Bank of New Zealand cut rates to 3.0% last month and flagged further easing was needed to actively stimulate a sluggish economy.
Markets are priced for a cut at the next meeting on October 8, and rates of 2.5% by early next year. (Reporting by Wayne Cole; Editing by Edwina Gibbs)
