Data Favors Rate Doves, Australian and New Zealand Dollars Edge Higher

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Australian and New Zealand dollars increased Tuesday as market sentiment buoyed riskier assets after the lack of negative news around Australian banks. Domestic data also supported wagers for a pause in Australian rate rises, pointing to subdued inflationary pressures.

The Australian dollar rose to its highest level in two weeks, hitting $0.6680 and adding 0.4% from the day’s opening price. The gains were driven by a rebound in global stock markets and solid domestic data suggesting a pause in the rate hikes from the Reserve Bank of Australia (RBA).

Analysts believe that with subdued inflationary pressures and signs of slowing growth, further rate rises are unlikely in the short term. This has given Aussie buyers confidence, propelling the currency against its peers.

According to analysts it could be found at $0.6625, while resistance is expected at $0.6695 and $0.6755 levels. They also said that movement on either side of these levels would determine where AUD/USD heads next in the near term.

Abhijit Surva, an economist at Capital Economics, said, “The tepid rise in retail sales in February all but locks in a contraction in sales volumes in Q1 and adds to the case for the RBA pausing its rate hiking cycle next week.”

The New Zealand dollar firmed to $0.6219, remaining well short of last week’s top of $0.6309. The NZD/USD rate will likely remain rangebound until the Reserve Bank of New Zealand (RBNZ) meets and announces its interest rate decision later this month.

Australian retail sales rose modestly by 0.2% in February, marginally higher than forecast but calming down after three months of wild swings.

The surprise pickup in retail sales figures buoyed investor confidence, with the Australian dollar continuing to rise against the greenback while stocks posted gains across the board.

Overall, with no significant surprises in domestic or international markets overnight, both currencies should remain firm going into Wednesday’s trading session ahead of key events later this week.

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