Australian, NZ Dollars Advance On Slower Fed Rate Hike Expectations

The Australian and NZ dollars appreciated against their major counterparts in the Asian session on Wednesday, as soft U.S. economic data raised hopes that the Federal Reserve is likely slow the pace of rate hikes following its meeting in November.

Overnight data showed that U.S. house price growth slowed in August and consumer confidence fell in October, in a sign that the pace of further interest rate hikes could be smaller.

The Fed is widely expected to raise interest rates by another 75 basis points next week, although CME Group's FedWatch Tool shows the chances for a 50 or 75 basis point rate hike in December are split roughly fifty-fifty.

A few Fed officials have softened their stance on tightening in recent days, prompting investors to reconsider the path of monetary policy.

Data from the Australian Bureau of Statistics showed that Australia's inflation surged 7.3 percent on year in the third quarter of 2022 - exceeding expectations for an increase of 7.0 percent and accelerating from 6.1 percent in the previous three months.

On a seasonally adjusted quarterly basis, inflation climbed 1.8 percent - unchanged from the second quarter but above estimates for 1.6 percent.

The aussie climbed to near 3-week highs of 0.6489 against the greenback and 0.8782 against the loonie, off its previous lows of 0.6372 and 0.8683, respectively. The currency is seen facing resistance around 0.69 against the greenback and 0.90 against the loonie.

The aussie touched an 8-day high of 1.1160 against the kiwi, 2-day highs of 95.28 against the yen and 1.5465 against the euro, up from its early lows of 1.1098, 94.38 and 1.5621, respectively. The next possible resistance for the currency is located around 1.14 against the kiwi, 98.00 against the yen and 1.49 against the euro.

The kiwi advanced to near a 3-week high of 0.5815 against the greenback and a 2-day high of 85.48 against the yen, following its early lows of 0.5725 and 84.83, respectively. The currency is likely to find resistance around 0.62 against the greenback and 87.00 against the yen.

The kiwi was up against the euro at 1.7258. On the upside, 1.66 is possibly seen as its next resistance level.

Looking ahead, U.S. new home sales, wholesale inventories and advance goods trade balance for September will be published in the New York session.

At 10 am ET, the Bank of Canada will announce its interest rate decision. The BoC is widely expected to raise interest rate to 4 percent from 3.25 percent.