Antipodean Currencies Hover Near Highs on Trade Deal Hopes, Weaker Domestic Outlook
The Australian dollar (AUD) and New Zealand dollar (NZD) continued to gain ground on Tuesday, buoyed by hopes for progress in US-China trade talks and a softer greenback, even as domestic economic signals remained tepid.
The Aussie inched up 0.1% to $0.6523, briefly touching an intraday high of $0.6533—just shy of its seven-month peak at $0.6537. It remains comfortably above the 200-day moving average support at $0.6431, suggesting near-term resilience despite lingering local headwinds.
Meanwhile, the New Zealand dollar also rose 0.1% to $0.6052, having climbed as high as $0.6066 in the prior session. The kiwi is trading near its eight-month top of $0.6080, with upside targets seen at $0.6119 and $0.6379, should bullish momentum persist.
Trade Talks in London Fuel Risk-On Sentiment
The catalyst behind the rally in risk-sensitive currencies is optimism surrounding the second day of trade talks in London between the US and China. While the dispute has expanded beyond tariffs to include rare earth restrictions, recent moves—such as Beijing’s issuance of licenses to US automakers—have raised hopes for a diplomatic breakthrough.
“After consolidating between 0.6350 and 0.6540 for a month, the AUD/USD is poised to break higher,” said Tony Sycamore, analyst at IG, who sees medium-term resistance at 0.6740/50 as the next key level.
Domestic Data Fails to Impress
On the economic front, the backdrop in Australia remains subdued:
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Business activity stalled in May, with consumer spending muted despite the recent rate cut.
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Consumer sentiment improved only marginally, as inflation concerns and a murky economic outlook dampened optimism.
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Last week’s weak GDP print has added to speculation that the Reserve Bank of Australia (RBA) may have held monetary policy too tight for too long.
Interest rate swaps now price in a 75% probability of a rate cut in July, with an 87-basis-point easing priced in by mid-2026.
The New Zealand economy, while slightly more stable, also lacks fresh catalysts this week, leaving the kiwi’s direction largely tethered to external factors—most notably the strength of the US dollar and outcomes from global trade negotiations.
Market Ahead: Eyes on US CPI
With little major domestic data on tap this week, attention turns to the US Consumer Price Index (CPI) report for May, due Wednesday. The reading is expected to provide crucial insight into tariff-related inflation pressures, potentially steering broader risk sentiment and dollar dynamics.
Bond markets reopened with slightly higher yields following Friday’s US jobs report, which beat expectations:
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Australia’s 3-year government bond yields rose 2 basis points to 3.385%.
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10-year yields climbed 3 basis points to 4.301%.
Outlook: Tentative Upside for AUD and NZD
Despite internal economic weakness and dovish central bank expectations, both the AUD and NZD remain supported by external optimism and technical tailwinds. However, any hawkish surprise from the Fed or a disruption in trade talks could quickly shift sentiment.
For now, the market’s bias leans positive, but further gains depend heavily on geopolitical stability and the next moves in US inflation data.
