By Wayne Cole

The Australian and New Zealand dollars held still on Thursday as the threat of a new round of U.S.-China trade restrictions curbed risk sentiment ahead of a key reading on U.S. inflation.

Investors assume the U.S. consumer price report on Friday is unlikely to deter the Federal Reserve from cutting rates next week, but could decide whether it moves in December as well.

Australia’s third-quarter CPI is due on October 29 and again will likely decide whether the Reserve Bank of Australia cuts its 3.60% cash rate in November.

Analysts at CBA see headline CPI picking up to an annual 3.0%, the very top of the RBA’s 2% to 3% target band, while the core measure should stay at 2.7%.

“Given the cautious and gradual pace of easing so far, we expect the RBA will want to see clear evidence that inflation is continuing to move towards the mid-point of the target band before easing further,” said Trent Saunders, a senior economist at CBA.

“With trimmed-mean inflation expected to remain steady on an annual basis, we do not expect the hurdle for another rate cut to be met by the November meeting.”

With so much at stake the Aussie was stuck at $0.6487 AUDUSD, having hardly moved overnight. Support comes in at $0.6471 and $0.6438, with resistance around $0.6525 and $0.6628.

The kiwi dollar idled at $0.5736 NZDUSD after crawling as high as $0.5759 overnight. Support lies at $0.5710, with resistance at $0.5769 and $0.5884.

Yields on kiwi 10-year bonds (NZ10YT=RR) have fallen 22 basis points so far this month to trade 12 basis points under Australian yields, near levels not seen since 2020.

New Zealand cash rates at 2.5% are far below the Australian 3.60%, helping lift the Aussie as high as NZ$1.1445 AUDNZD earlier this month from around NZ$1.0800 mid-year. It was last trading at NZ$1.1302.

“This does suggest a good chance the cross can test levels above NZ$1.1500, but we don’t envisage such moves as likely to prove sustainable,” said Rodrigo Catril, a senior FX strategist at NAB.

In particular, there was a good chance the New Zealand economy would pick up speed in the coming quarter given the full impulse from past rate cuts is yet to be felt.

“If we are right about NZ potential growth rebound, then next year the cross is at risk of facing a more pronounced downturn,” he added.