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AUD/USD and NZD/USD Fundamental Daily Forecast – Showing Muted Reaction to Middle East Calm

Despite increased risk appetite, the Australian and New Zealand Dollars are surprisingly putting in a mixed performance on Thursday. This suggests investors have shifted their focus away from the optimism over the U.S.-China trade deal to the domestic economy and central bank activity.

The Aussie and the Kiwi are showing only a steady response to the easing of tensions in the Middle East that dampened one potential risk to the global economy. On Wednesday, both currencies retreated when Iran launched a rocket attack on U.S. bases in Iraq, but the tone in the markets turned positive when President Donald Trump suggested Iran was “standing down” and stopped short of military retaliation.

At 07:51 GMT, the AUD/USD is trading .6875, up 0.0008 or +0.76% and the NZD/USD is at .6647, down 0.0004 or -0.06%.

The Australian Dollar was also underpinned by Chinese consumer inflation data that narrowly missed forecasts even as it remained elevated, and data that showed Australia’s trade surplus swelled to a surprisingly strong A$5.8 billion in November, buoyed by exports of iron ore and liquefied natural gas.

Aussie, Kiwi Rebound as Sentiment Approves

The Aussie and Kiwi rebounded on Wednesday and remained supported today after U.S. President Donald Trump’s comments on the Iran eased investor worries about further escalation of geopolitical risks in the Middle East.

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“The main driver was President Trump’s delayed response to the missile strike yesterday, suggestive that he was taking a more cautious approach (than) his usual demeanor and prior tweets suggested,” Tapas Strickland, director of economics and markets at the National Australia Bank, wrote in a morning note.

“Markets have now largely unwound the risk-off moves that have occurred since Friday,” Strickland added.

China’s CPI Steadies, PPI Falls

China’s consumer inflation steadied while factory-gate prices fell at a slower pace in December, giving Beijing room to stay the course on monetary easing as economic growth cools. Some investors have worried that consumer inflation, hovering near eight-year highs, could make China’s central bank more cautious about further stimulus.

Australian Trade Surplus Jumps but Imports Spark Concerns

Australia recorded its 23rd consecutive monthly trade surplus after stronger coal, iron ore and gas exports saw a $1.7 billion jump to a better than expected $5.8 billion in November, but imports have slowed, raising concerns about consumption.

Daily Forecast

The AUD/USD and NZD/USD could trade sideways-to-higher on Thursday if sentiment for risk remains strong. However, gains could be limited ahead of Friday’s Australian Retail Sales and the U.S. Non-Farm Payrolls reports.

This article was originally posted on FX Empire

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