Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Expected to Leave Cash Rate at 1.50% for 19th Straight Meeting
The commodity-linked Australian and New Zealand Dollars posted solid gains on Monday. Both rallies were fueled by increased demand for higher risk with the Aussie also responding to positive news about company profits and an unexpected rise in retail sales.
The AUD/USD settled at .7648, up 0.0080 or +1.04% and the NZD/USD finished at .7030, up 0.0043 or +0.61%.
The rally drove the Australian Dollar to its highest level since April 23. The New Zealand Dollar posted its highest close since May 4.
Lurking in the shadows on Monday were global trade concerns which re-emerged after China warned the United States against tariffs or other protectionist measures.
U.S. Treasury yields rose on Monday, this may have limited gains. Investors continued to react to Friday’s strong U.S. jobs report. A solid increase in average hourly earnings helped solidify a June Fed rate hike, while increasing the chances of two more rate hikes after that in 2018.
There was only one report on Monday, new orders for U.S.-made goods fell more than expected in April. According to the Department of Commerce, Factory Orders fell 0.8 percent for April, while data for March was revised upward to 1.7 percent. Traders had forecast orders falling 0.5 percent.
Forecast
The focus on Tuesday will be on the Australian Dollar due to the release of fresh domestic data and the Reserve Bank of Australia’s Rate Statement and interest rate decision at 0430 GMT. The RBA is widely expected to leave its benchmark interest rate at 1.50%.
At 0311 GMT, the AUD/USD is trading .7633, down 0.0016 or -0.20%.
Early Tuesday, the AIG Services Index was reported at 59.0, up from 55.2. The Current Account was worse than expected at -10.5B. Traders were looking for -9.98B. The previous read was revised lower to -14.7B. China’s Caixin Services PMI was unchanged at 52.9 as expected.
At 0430 GMT, investors will get the opportunity to react to the Reserve Bank of Australia (RBA) June interest rate decision. The central bank is widely expected to keep rates unchanged at a record low of 1.5 percent.
Historical statistics show that the cash rate has remained at 1.5% for 19 consecutive meetings and investors do not expect an interest rate hike before the end of 2019. This means the market will not be looking for a full 25 basis point rise until November 2019.
The RBA Rate Statement is expected to show the central bank will retain its neutral stance, but that may not deter the bulls from driving the AUD/USD higher as traders are already pricing in stronger than expected first quarter GDP numbers on Wednesday. Early estimates are for a 0.8% increase versus the previously reported 0.4%.
A hawkish RBA Rate Statement, or one that predicts increasing inflation could drive Australian bond yields higher on Tuesday. This would be supportive for the AUD/USD.
If the central bank issues a dovish view on the Australian economy, and domestic yields tumble, then look for the AUD/USD to weaken.
This article was originally posted on FX Empire
