**Title: Australian and New Zealand Dollars Under Pressure Amid Global Markets Sell-Off**
*Based on reporting by Wayne Cole for Reuters; supplemented by broader market analysis and insights.*
—
### Introduction
The Australian and New Zealand dollars experienced significant declines as investors reacted to a widespread retreat in global equities and shifting expectations for interest rates both domestically and abroad. The sell-off underscored the risk-sensitive nature of the currencies and the importance of international market sentiment in driving moves for both the Australian and New Zealand dollars.
### Global Equity Market Turmoil
Recent trading sessions saw sharp declines in global equity markets as concerns mounted about tighter monetary policy, persistent inflation, and ongoing geopolitical risks. Notable declines in US stock indexes echoed through the Asia-Pacific region, pressuring currencies that are closely linked to risk appetite.
#### Key Drivers Behind the Equity Retreat
– **Federal Reserve Policy Expectations**
– Investors are increasingly focused on the likelihood of persistent high interest rates in the United States.
– Recent statements from the Federal Reserve suggested a cautious approach towards rate cuts, contributing to a stronger US dollar and weaker risk assets.
– **Stubborn Inflation Reads**
– Inflation data in the United States and Europe remain above central bank targets.
– Higher-than-expected inflation prints raise concerns about the need for higher rates for longer.
– **Geopolitical Uncertainty**
– Ongoing conflicts and trade tensions have increased volatility in global markets.
– Safe haven flows into the US dollar and government bonds have led to outflows from risk-sensitive assets.
### Impact on the Australian and New Zealand Dollars
#### AUD/USD (Australian Dollar against US Dollar)
– The Australian dollar fell by as much as 1 percent during the trading session, moving from above 0.6650 USD to as low as 0.6580 USD before paring losses slightly.
– The currency remains highly correlated with global equity sentiment and commodity prices, particularly iron ore and coal, two major Australian exports.
#### NZD/USD (New Zealand Dollar against US Dollar)
– The New Zealand dollar followed a similar trajectory, dropping below 0.6120 before stabilizing near 0.6100.
– Softer domestic data and cautious commentary from the Reserve Bank of New Zealand have fueled some of the declines.
### Domestic Economic Developments
#### Australia
– The Reserve Bank of Australia (RBA) has adopted a cautious stance as inflation continues to run above its 2 to 3 percent target.
– Recent data suggest some cooling in the labor market, with slower employment growth and rising jobless rates in key sectors.
– Retail sales figures also showed signs of slowing consumer demand.
– Market participants are split on whether the RBA will consider another rate hike before initiating an easing cycle.
#### New Zealand
– The Reserve Bank of New Zealand (RBNZ) faces a similar inflation challenge, although growth has been softer compared to Australia.
– Housing market weakness and reduced business confidence have weighed on domestic activity.
– Recent RBN
Read more on AUD/USD trading.