SYDNEY, July 29 (Reuters) - The Australian and New Zealand dollars inched higher on Thursday against their U.S. counterpart which hit a two-week low as the Federal Reserve wrongfooted bulls by insisting that rate rises were still far off.
Overnight, the Fed sounded confident about the U.S. economy but Chairman Jerome Powell was more circumspect in his news conference, saying rate increases were “a ways away” and the job market still had “some ground to cover”. [nL1N2P30V1
The prospect of extended U.S. monetary stimulus, boosted riskier assets such as the Aussie and kiwi dollars.
The Australian dollar rose from a one-week trough of $0.7317 touched on Wednesday to as high as $0.7381. The currency faces critical chart resistance around $0.7390, a breach above could take it as high as $0.7490.
The New Zealand dollar was last at $0.6962, up from a one-week low of $0.6968 touched on Wednesday.
The main focus for investors next will be U.S. gross domestic product data due later in the day where forecasts vary wildly but the consensus is for 8.5% annualised growth.
“U.S. growth look to have peaked – at least in the short term – in May so tonight’s number will be closely watched,” said Steven Dooley, currency strategist at Western Union Business Solutions.
Investors are also keeping a tab on a rapidly spreading COVID-19 outbreak in Australia’s most populous city of Sydney which is in its fifth week of lockdown as authorities scramble to stamp out the highly transmissible Delta variant
The outbreak has turned Australia’s fortunes on its head with the country’s economy seen shrinking in the third quarter, its first quarterly contraction since June 2020 despite early success in curbing the pandemic and largely reopening its economy.
The Reserve Bank of Australia (RBA) meets next week where it is widely expected to reverse an earlier decision to taper its bond buying programme from September while leaving the cash rate at a record low 0.1%.
New Zealand government bonds gained, sending yields two basis points lower at the long-end of the curve.
Australian government bond futures were unchanged, with the three-year bond contract flat at 99.725 and the 10-year contract at 98.85.
(Reporting by Swati Pandey; Editing by Simon Cameron-Moore)