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Australian Wage Price Index gives RBA breathing room on cash rate hike

Written by Sam Coxhead on May 18th, 2011.      0 comments

1:55 AM (AEST) The quarterly Australian Wage Price Index just released showed a rise of .8% against an expectation of a 1.2% rise. This gives the RBA breathing room for their pending cash rate hike to 5.0% from the current 4.75%. The AUD softened against all major trading partners on this release and the likely hood of the next rise coming in June is diminishing in my view. August is the most likely outcome now.

In offshore markets the price action was choppy across all asset classes. US equities recovered from being down 1% to close flat and gold and oil also closed off their lows. The bouce back in risk towards the end of the US session meant the USD gave up most of its hard fought gains on most cross rates.

The market feels weary and full of uncertainty in my view. The benchmark US 10year yield touched 3.10% , and remains poised for a pop higher as the end of the quantitative easing program nears. The fact that the EU/IMF investigations into solutions for the Greek debt crisis have been extended for a week is further adding to the uncertainty. There is evidence that sold positions in the EURO have been squeezed to exit positions, this can be seen by the vaious steep spikes higher in the EUR/USD pair, before setting back down to consolidate. The USD remmains under pressure in the early Asian session. The prospect of the Bank of England Monetary Policy Committee Meeting minutes due for release in the UK today is capping any progress for the Pund Sterling at this stage.

NZD/USD .7865
AUD/USD 1.0626
NZD/AUD .7402
AUD/NZD 1.3510
NZD/GBP .4842
NZD/EUR .5517
NZD/JPY 64.02
NZD/CAD .7647