Australia dollar extends gains after bumper August, Q2 GDP likely soft

By Stella Qiu

SYDNEY, Sept 1 (Reuters) - The Australian and New Zealand dollars extended their recent winning streak on Monday as the greenback felt the drag of rate cut wagers, while weak local data foreshadowed another quarter of soft growth for the Australian economy.

The Aussie AUD=D3 edged up 0.2% to a nearly three-week top of $0.6549, up for the fifth straight session. Investors are now eyeing major resistance at $0.6550 and $0.6568 after a 1.7% jump in August.

The kiwi NZD=D3 also gained 0.2% to $0.5908, the highest in almost two weeks, having risen 0.4% last week. It is, however, still stuck at the bottom of the recent trading range between 58.5 cents and 61 cents.

The two Antipodeans weathered a rise in U.S. inflation on Friday relatively well as the uptick came in within expectations, leaving hopes for a rate cut from the Federal Reserve this month mostly intact at 90% priced. 0#USDIRPR

All eyes are on the non-farm payrolls data on Friday.

"There is a risk weak labour market data causes participants to price some chance of a 50 bp cut before year-end, weighing on the USD," said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.

"AUD/USD can lift above 0.6600 this week if the USD weakens as we expect," Capurso said.

Data showed that Australia's business inventories rose 0.1% in the second quarter, implying a drag of around 0.4 percentage points on second-quarter GDP, which is due on Wednesday.

Forecasts had centred on a 0.5% quarterly rise in economic growth, which will lift annual growth to 1.6% from 1.3% in the first quarter.

"Today's data points to some downside risk to our current forecast for Q2 GDP," said Pat Bustamante, a senior economist at Westpac.

"The wages data suggests Australia’s economic recovery lost momentum over the first half of 2025."

However, house prices jumped in August to hit another record high after the third rate cut from the central bank fuelled buyer demand. Building approvals also fell in July after a strong June.

In the week ahead, Reserve Bank of Australia Governor Michele Bullock will deliver a speech on Wednesday about technology and the future of central banking, while Deputy Governor Andrew Hauser will be interviewed by Reuters on Thursday.

Across the Tasman Sea, the New Zealand government announced that the country will allow some wealth overseas-based investors to buy or build a house worth more than NZ$5 million.