SYDNEY - The Australian and New Zealand dollars suffered a setback on Wednesday as disappointing Chinese economic data chilled some of the cheer caused by a temporary easing in the Sino-U.S. trade dispute.
The Aussie dollar eased to $0.6785, from an offshore top of $0.6819, but kept above important support at $0.6750. A break of major resistance at $0.6822 is needed to keep the bounce going.
The kiwi dollar dfted to $0.6450, from a peak of $0.6470, but again held above $0.6422 support.
Both had rallied overnight when U.S. President Donald Trump backed off his Sept. 1 deadline for 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods, in the hopes of blunting their impact on holiday sales.
The reprieve prompted a pullback in the safe-haven yen, which saw the Aussie jump 2% to as high as 72.92 yen at one stage.
The mood turned sober, however, after China reported industrial output and retail sales both rose by much less than expected in July, reversing what had been a promising improvement in June.
In any case, analysts had been cautioning that nothing much had really changed in the standoff over tariffs.
"Markets have rallied on the notion that Trump has blinked and is sensitive to falling stock markets," said Tapas Strickland, a director of economics at NAB.
"But overall a high degree of scepticism should remain and an imminent deal is unlikely given Trump has foreshadowed he is going to be campaigning hard on the issue in the 2020 election."
Domestically, the latest Australian economic news was too mixed to change wagers on further rate cuts.
The official measure of wages slightly beat expectations by rising 0.6% in the June quarter, but that still left the annual pace at a sluggish 2.3%.
Wage growth shows no sign of accelerating above the 3% rate that the Reserve Bank of Australia (RBA) has said is needed to give a much-needed lift to inflation.
More welcome was a 3.6% bounce in the Westpac measure of consumer confidence in August, and a substantial improvement in sentiment toward the long-suffering housing market.
None of this was enough to shake investors' conviction that the RBA will have to cut rates again, with a move to 0.75% in October almost fully priced in 0#YIB: . A further easing to 0.5% is implied by February.
Australian government bond futures eased a touch on the Sino-U.S. trade news, but were only just off historic highs. The three-year bond contract YTTc1 dipped 2 ticks to 99.335, while the 10-year contract YTCc1 fell 2.5 ticks to 99.0400.
(Editing by Shri Navaratnam) ((Wayne.Cole@thomsonreuters.com; 612 9321 8162; Reuters Messaging: email@example.com))