Australian, NZ Dollars Fall As Risk Sentiment Worsens

The Australian and NZ dollars fell against their major counterparts in the European session on Friday, amid lingering worries over inflation and looming central bank rate hikes.

Investors digested comments from European Central Bank president Christine Lagarde signaling a major policy shift. Following Lagarde's hawkish remarks, money markets are pricing in nearly 50 basis points of tightening by the end of this year.

The Bank of England raised its key rate again and several policymakers preferred a 50 basis point increase to tackle inflation.

Investors awaited U.S. jobs data due later today, which is expected to show a gain of 150,000 jobs in January. The unemployment rate is expected to hold at 3.9 percent.

The Reserve Bank of Australia raised its inflation outlook citing robust demand for housing and the increases in prices of durable goods and fuel.

In the latest Statement on Monetary Policy, the central bank said underlying inflation picked up in recent quarters and is forecast to increase further to 3.25 percent in mid-2022, largely reflecting upstream cost pressures amid strong demand in housing construction and the durables goods sector.

The aussie depreciated to 3-day lows of 0.7097 against the greenback and 0.9021 against the loonie, down from its prior highs of 0.7152 and 0.9063, respectively. The aussie may locate support around 0.68 against the greenback and 0.89 against the loonie.

Pulling away from its previous highs of 1.6000 against the euro and 1.0718 against the kiwi, the aussie dropped to a fresh 2-month low of 1.6165 and a 4-day low of 1.0680, respectively. The next immediate support for the aussie is seen around 1.64 against the euro and 1.045 against the kiwi.

The aussie reversed from an early high of 82.22 against the yen, reaching as low as 81.53. The currency is poised to challenge support around the 80.00 mark.

The kiwi weakened to 0.6629 against the greenback and 76.13 against the yen, off its early 9-day high of 0.6683 and a 2-week high of 76.78, respectively. The kiwi is seen finding support around 0.63 against the greenback and 74.00 against the yen.

The kiwi fell to more than a 1-year low of 1.7299 against the euro, reversing from an early high of 1.7137. If the currency drops further, 1.75 is possibly seen as its next support level.

Looking ahead, U.S. and Canadian jobs data and Canada Ivey PMI, all for January, will be released in the New York session.