Australia, NZ dollars find support in US rate cut wagers

By Wayne Cole

SYDNEY, Aug 13 (Reuters) - The Australian and New Zealand dollars consolidated quietly on Wednesday as mounting expectations of a U.S. rate cut undermined the greenback and offset looser policy at home.

The Aussie was down a fraction at $0.6519 AUD=D3, having bounced from a low of $0.6483 overnight. Resistance lies at $0.6541 ahead of the recent top of $0.6625, with support at $0.6450 and $0.6419.

The kiwi dollar stood at $0.5947 NZD=D3, after rallying from a trough of $0.5914 overnight. It now faces resistance around $0.5971.

Risk sentiment received a boost as U.S. inflation proved no higher than expected and helped the Aussie weather a cut in interest rates from the Reserve Bank of Australia, as well as a dovish policy outlook.

Data showing wage growth holding steady at a moderate 3.4% in the second quarter was not seen as an obstacle to easing, while promising some support to consumer spending.

Markets imply around a 35% chance the RBA will trim the 3.60% cash rate at its next meeting in September, and are fully priced for a move in November. 0#AUDIRPR

"The RBA's communications reflect a clear easing bias," said Andrew Boak, an economist at Goldman Sachs.

"We view the balance of risks to our forecast rate cuts in November/February as skewed to the downside – with back-to-back cuts likely in September should the next couple of labour market reports disappoint."

The July jobs report is due on Thursday and analysts look for employment to bounce back by 25,000 after a surprisingly subdued 2,000 gain in June.

The unemployment rate is expected to hold at 4.3% after a jump in June, but any further increase would narrow the odds for a rate reduction in September.

The Reserve Bank of New Zealand holds its next meeting on August 20 and markets imply a 90% probability it will cut the 3.25% cash rate by a quarter point, bringing its easing cycle to a whopping 250 basis points. 0#NZDIRPR

Investors look for perhaps one further cut to come late this year or early next, followed by a protracted period at 2.75%.

That outlook has seen two-year swap rates NZDSM3NB2Y= rally steadily to reach 3.00%, a whisker from a May low of 2.985%. A break under there would take it to levels not seen since early 2022.

Yields on 10-year bonds NZ10YT=RR hit four-month lows at 4.418%, narrowing the spread over Treasuries to a slim 13 basis points.