SYDNEY, Sept 16 (Reuters) - The New Zealand dollar struggled on Thursday to get a lasting lift out of strong economic data, while the Australian dollar had to weather a messy jobs report that underlined the damage coronavirus lockdowns were doing.
The kiwi dollar was flat at $0.7114, after failing to sustain a rally to $0.7143. The Aussie was pinned at $0.7324 , having touched a two-week low of $0.7315.
Both currencies have been burdened by concerns over global growth as economic news from China disappointed and Asian equity markets lagged, to the benefit of the safe-haven U.S. dollar.
The caution even overshadowed a startlingly strong GDP report from New Zealand which showed the economy grew 2.8% in the June quarter, more than double market forecasts of 1.3%.
Growth was broad-based and reinforced expectations activity would recover quickly from lockdown.
Markets are all but certain the Reserve Bank of New Zealand (RBNZ) will hike interest rates by a quarter point next month, and maybe by half a point.
The central bank delayed raising rates last month after the country was put into a snap COVID-19 lockdown, but said a hike was still on the cards.
“A red-hot economy, tight labour market, rising consumer prices, and eye-popping house price growth,” said Jarrod Kerr, chief economist at Kiwibank. “When the stars align like this, a rate hike is imminent.”
“We expect the RBNZ to follow-through in October, with three hikes to 1% by February and 1.5% by this time next year.”
The upbeat GDP data did have an affect on bonds where 10-year yields popped up 5 basis points to 1.86%, putting them a wide 56 basis points above Treasury yields.
Australian 10-year yields, in contrast, traded 4 basis points below those in the United States at 1.26%, reflecting a very different outlook for rates.
The Reserve Bank of Australia (RBA) this week again reiterated that no hike was likely before 2024 given weakness in wages and inflation.
Lockdowns were another setback to Australia’s labour market with employment falling a steep 146,000 in August. While the jobless rate dipped to 4.5%, that was only because people confined to their homes were unable to look for work.
“The underemployment rate, which has in recent years perhaps been a better guide to labour market tightness, rose sharply in August,” noted HSBC economist Paul Bloxham.
“The average of July and August hours worked, relative to Q2, was down 2.8%, which could be a useful guide to the order to magnitude of the fall in GDP that might be expected in Q3.”
(Editing by Ana Nicolaci da Costa)