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AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Drifting Lower Ahead of Major Wage Price Index Report

Look for further pressure on the AUD/USD if the Wage Price Index comes in below the 0.6% estimate. This would be the first sign of weakness in the labor market this week. The next signs of weakness could come in Thursday’s Employment Change and Unemployment Rate reports.

The focus is on the Australian Dollar early Wednesday as investors await the release of the quarterly Wage Price Index. This report could determine whether the Reserve Bank of Australia (RBA) cuts it benchmark rate in June or waits until August. Traders will also be looking to respond to a slew of economic reports from China in the wake of the breakdown in trade talks between the United States and China.

At 01:12 GMT, the AUD/USD is trading .6930, down 0.0014 or -0.21% and the NZD/USD is at .6568, down 0.0006 or -0.09%.

Earlier today, the Wespac-Melbourne Institute Index of Consumer Sentiment rose 0.6% to 101.3 in May from 100.7 in April. The overall movement in the index in May is modest. It is also important to note that the Index has held above 100 for ten of the last twelve months.

According to analysts at Westpac, “Last month’s survey showed a clear boost form the Federal Budget, which was in the middle of the April survey period. Readings before the Budget announcement were much lower than in the post Budget period, indicating that it had been well received by consumers.”

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“Indeed the post-Budget Index reading was 104.3 meaning that sentiment in May has deteriorated by around 3% compared to post Budget levels. This probably reflects some ‘cooling off’ from the initial confidence boost, which was substantial.”

“Despite the Reserve Bank ultimately deciding not to cut the cash rate at its May Board meeting it is likely that households are much more confident this month than previously that interest rates are likely to come down further. Media coverage both pre and post the Reserve Bank decision is pointing strongly to eventual interest rate relief.

Daily Forecast

Look for further pressure on the AUD/USD if the Wage Price Index comes in below the 0.6% estimate. This would be the first sign of weakness in the labor market this week. The next signs of weakness could come in Thursday’s Employment Change and Unemployment Rate reports.

This article was originally posted on FX Empire

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