AUD/NZD sticks near-21DMA at 1.06010 as weak Aus/NZ data shrugged off for now

• AUD/NZD stuck close to its 21DMA on Tuesday just above 1.0600.
• Weak weekly Australia Consumer Confidence data was negated by a pessimistic NZ business survey.
• NZIER’s survey was also very inflationary, however, supporting the case for RBNZ rate hikes this year.

As has been the case for most of the last four sessions, AUD/NZD spent most of Tuesday’s session trading close to its 21-day moving average, which currently resides close to 1.0610. That means the pair continues to trade well within the 1.0580-1.0650ish ranges that have prevailed so far in 2022. Weekly Australia ANZ Consumer Confidence data release on Tuesday showed another sharp deterioration in confidence as Omicron continues to rage across Australia.

The Australian bank’s measure of consumer sentiment slid dropped 7.6% last week to its lowest since October 2020, below its levels during the surge in Delta infections during 2021 that saw certain areas of the country enter prolonged lockdowns. But the week data did not send AUD/NZD below 1.0600 as it was negated by equally downbeat data out of New Zealand. According to the think tank NZIER’s quarterly survey of business opinion (QSBO), a net 28.0% of surveyed companies expect general business conditions to deteriorate in Q4 compared to 11% in the previous quarter.

Perhaps this reflected anticipation that the wave of Omicron being seen in Australia would soon arrive on New Zealand’s shores. However, NZIER’s QSBO also showed a fresh build-up of inflationary pressures, which will likely encourage the RBNZ to press on with interest rate hikes in the coming months. A net 61% of surveyed firms reported increased costs in Q4, the most since June 2008, while 52% of survey respondents said they had raised prices, the highest such proportion since 1987. The report also spoke of acute labour shortages.

“Inflationary pressures were evident and appear to be accelerating,” said analysts at Kiwibank. “A closed border means it's becoming increasingly difficult to find skilled staff, and an exceptionally tight labour market is driving up wages” the bank added, saying that the reinforced the case for more monetary tightening from the RBNZ. For now though, AUD/NZD traders have been reticent to add bearish bets on RBNZ rate hike expectations in the run up to Australian December labour market data. If sufficiently strong, the data (released on Thursday) may be enough to spur further hawkish RBA rate bets. Despite the central bank saying it will not hike before 2023, markets currently expect the bank to lift rates before the end of H1 2022.