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Australian, New Zealand dollars transfixed as trade talks tick down

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The Australian and New Zealand dollars shuffled sideways on Tuesday as Sino-US trade talks approached a weekend tariff deadline with little sign of progress, while data pointed to subdued economic conditions at home.

[SYDNEY] The Australian and New Zealand dollars shuffled sideways on Tuesday as Sino-US trade talks approached a weekend tariff deadline with little sign of progress, while data pointed to subdued economic conditions at home.

The Aussie idled at US$0.6825 in very quiet trade, having spent six sessions snared in a snug US$0.6813/6862 range.

The kiwi dollar was equally becalmed at US$0.6555, though it remains within striking distance of last week's four-month top at US$0.6576.

Measures of volatility are near the lowest this century as investors shy from taking positions ahead of a Dec 15 deadline for new tariffs on China.

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US Agriculture Secretary Sonny Perdue on Monday said President Donald Trump does not want to implement the tariffs but wanted "movement" from Beijing to avoid them.

Australian data were too mixed to offer any impetus with a survey of business showing activity remaining subdued in November while confidence ebbed a little.

National Australia Bank's index of business conditions held at +4 in November, still short of the long-run average of +6.

"The survey is consistent with ongoing weakness in GDP growth, especially private demand, and suggests there has been little improvement in Q4 for GDP," said NAB group chief economist Alan Oster.

Figures for the third quarter out last week showed household consumption grew at the slowest pace since the global financial crisis, limiting gross domestic product (GDP) to a modest increase of 0.4 per cent.

The Reserve Bank of Australia (RBA) and the government had been hoping consumers would spend the cash from tax relief and recent rate cuts, but most chose to save the money or pay down debt.

Speaking earlier on Tuesday, RBA Governor Philip Lowe said he had been surprised at the weakness of consumption, but was still confident that households would spend much of the extra cash over time.

Markets are not so sure and futures are almost fully priced for another quarter point rate cut to 0.5 per cent by April, with a good chance of a move to 0.25 per cent by year end.

Australian government bond futures edged higher amid the uncertainty over trade, with the three-year bond contract up 1.5 ticks at 99.295. The 10-year contract rose 2.75 ticks to 98.8775.

REUTERS