Australia, NZ dollars find support after setback; Aussie data aids

By Wayne Cole

SYDNEY, July 31 (Reuters) - The Australian and New Zealand dollars steadied on Thursday after losing ground to a broadly firmer U.S. currency, while the Aussie drew support from surprising strength in domestic consumption data.

The Aussie edged up 0.3% to $0.6451 AUD=D3, having slid 1.2% the previous session to a one-month low of $0.6427. That was the fifth straight session of losses and leaves the Aussie a long way from its recent eight-month top of $0.6625.

The kiwi added 0.2% to $0.5911 NZD=D3, after dropping 1.1% overnight to a trough of $0.5889. Support now lies around $0.5883 and $0.5847.

Australian data showed retail sales jumped 1.2% in June, beating forecasts of a 0.4% gain, as discounts and new product launches drew shoppers after months of modest gains.

The surge could be a sign of a long-awaited revival in household spending, though sales volumes for the whole June quarter still only rose by a modest 0.3% and made a marginal addition to economic growth.

Markets still imply around a 90% chance the Reserve Bank of Australia will cut its 3.85% cash rate in August given inflation had moderated so broadly in the second quarter. 0#AUDIRPR

RBA Deputy Governor Andrew Hauser on Thursday said the inflation figures were "very welcome" news, while the labour market was still near full employment.

"We view Hauser's comments as confirming that both inflation and labour market conditions have become much less of an impediment to further rate cuts," said Andrew Boak, an economist at Goldman Sachs.

"We continue to expect the RBA to resume its easing cycle with a 25bp cut in August, followed by quarterly cuts in November and February," he added. "We view the risks as firmly skewed to a faster and deeper easing cycle."

Markets see rates bottoming at 3.10% by the end of the year.

Going the other way, markets have pared back the chance of the Federal Reserve cutting at its next meeting after Chair Jerome Powell said the full inflationary impact of tariffs had yet to be felt. 0#USDIRPR

That had helped lift the U.S. dollar overnight, before running into profit taking.