Australia, NZ dollars consolidate gains, data stays solid

By Wayne Cole

SYDNEY, Sept 4 (Reuters) - The Australian and New Zealand dollars held steady on Thursday, having benefited overnight from a revival in wagers for U.S. rate cuts, while positive domestic data provided further support to the Aussie.

There was good news on the trade account with Australia's surplus on goods widening to its highest since early 2024 at A$7.3 billion as a broad range of resource exports saw gains.

More tellingly for interest rates, household spending rose a solid 0.5% in July thanks to a splurge on services, while annual growth in spending hit its highest since late 2023.

It was a long-awaited rebound in consumption that lifted annual economic growth to a surprisingly brisk 1.8% in the June quarter as slowing inflation and falling mortgage repayments boosted real incomes.

Such was the upswing that Reserve Bank of Australia Governor Michele Bullock hinted that continued strength in consumption might limit the number of future rate cuts.

Markets reacted by halving the chance of an easing this month to 10%, while the probability of a quarter point cut to 3.35% in November dropped to 80% from fully priced. 0#AUDIRPR

"With the consumer springing back into action, the case for aggressive policy easing is becoming weaker," noted Abhijit Surya, a senior APAC economist at Capital Economics.

"With today's data reinforcing the notion that consumers are comfortable opening their wallets, we're growing less confident in our below-consensus terminal rate forecast of 2.85%."

The shift helped the Aussie hold at $0.6537 AUD=D3, after bouncing almost 0.4% overnight and away from the week's low at $0.6482. Stiff resistance now lies around $0.6560.

The kiwi dollar looked a little steadier at $0.5877 NZD=D3, having again rallied from support at $0.5839. Its main resistance is up at $0.5914.

Australian bonds had taken a knock from the firmer data, but rallied with Treasuries when soft U.S. jobs figures revived expectations for a Federal Reserve rate cut.

Yields on 10-year bonds AU10YT=RR fell back to 4.376%, from a three-month top of 4.446%. Three-year bond futures YTTc1 edged up 4 ticks to 96.500, and away from a 15-week trough at 96.430.