AUD/USD holds daily gains before Australian consumer inflation report

Australian dollar preserved daily gains against its US counterpart on Tuesday ahead of a report, that may show that Australian consumer prices rose in the fourth quarter of 2013.

AUD/USD touched a daily high at 0.8838 at 2:00 GMT, after which consolidation followed at 0.8822, up 0.11% for the day. Support was likely to be received at January 20th low, 0.8757, also the lowest point since July 22nd 2010, while resistance was to be met at January 16th high, 0.8906.

The annualized index of consumer prices in Australia probably advanced to 2.4% during the fourth quarter of 2013, according to the median estimate of experts, after in Q3 the index climbed to 2.2%. The official figure is scheduled to be released tomorrow.

Traders saw a 43% chance that the Reserve Bank of Australia will reduce its benchmark interest rate from the current record low level of 2.50% by the policy meeting in June, according to swaps data compiled by Bloomberg.

“You have global recovery gaining traction in 2014,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors said in an interview with Bloomberg Television, cited by the same media. “The combination of extremely pessimistic investor sentiment and some fundamental support from strong growth prospects in 2014 are the main reasons that I’m keen to buy the Aussie dollar at these levels.”

Australian benchmark three-year government notes snapped a three-day gain, as their yield climbed four basis points, or 0.04 percentage point, to reach 2.87%. The yield dropped to as low as 2.81% on Monday, which was the lowest level since September 30th.

Meanwhile, the Aussie was steady against the euro, with EUR/AUD cross down 0.09% to trade at 1.5371 at 7:38 GMT. AUD/NZD pair was also steady, gaining 0.03% on a daily basis to trade at 1.0592 at 7:44 GMT.

Earlier it became clear that annual consumer inflation in New Zealand accelerated in Q4 2013, which boosted expectations that nations central bank may raise borrowing costs from the current record low level of 2.50% at its policy meeting on January 30th. The annualized index of consumer prices climbed to 1.6% in Q4, marking its fastest increase rate since the beginning of 2012. Preliminary estimates pointed to a 1.5% annualized inflation in the fourth quarter. The Reserve Bank of New Zealand has not introduced a change in its benchmark interest rate since March 2011.

NZD/USD reached a session high at 0.8340 at 1:00 GMT, after which the pair consolidated at 0.8321, dipping 0.06% for the day.