Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Fed Minutes: Focus on Balance Sheet Plans
The Australian and New Zealand Dollars are trading lower on Wednesday as investors continue to deal with the uncertainty over the outcome of the U.S.-China trade talks, and general concerns ahead of the release of the U.S. Federal Reserve Monetary Policy Meeting Minutes at 19:00 GMT. New Zealand Dollar traders are also reacting to mixed producer price data. The Australian Dollar is trading lower in reaction to a dip in the Wage Price Index.
At 09:10 GMT, the AUD/USD is trading .7157, down 0.0008 or -0.13% and the NZD/USD is at .6866, down 0.0017 or -0.25%.
New Zealand Economic News
The New Zealand Dollar is trading lower on Wednesday, following the release of a mixed Producer Inflation report. Quarterly PPI Input rose 1.6%, better than the 1.0% forecast. PPI Output came in at 0.8%, below the 1.1% forecast. The jump in prices paid by producers was driven by a 23 percent increase in the prices paid for electricity and gas. Most producers weren’t able to pass on the increased energy cost.
Australian Economic News
According to the Australian Bureau of Statistics (ABS), Australian wage growth decelerated unexpectedly in the 2018 December quarter. Hourly wage growth excluding bonuses grew by 0.54% in the three months to December, coming in below the 0.6% pace expected.
That was the slowest quarterly increase since the September quarter of 2017, and well below the 0.62% pace reported previously.
Furthermore, the increase left wage growth over the year at 2.27%, marginally below the 2.29% level seen in the year to September. The annual rate was in line with market expectations, but below the 2.4% pace forecast by the RBA.
Daily Forecast
Today’s data raises issues about inflation in New Zealand and the employment situation in Australia, but this may have to take a backseat ahead of today’s release of the Fed minutes. Traders are likely to react to any news regarding the Fed’s balance sheet. This will determine whether the minutes are dovish or hawkish.
Based on the dovish comments from Fed Chairman Jerome Powell and the other policymakers, traders have reason to believe that the Fed is going to pause raising interest rates, however, they are less certain about what the central bank is going to do with the $4 trillion of bonds left on its balance sheet.
In the minutes, traders will be looking for clues as to what the central bank plans to do to affect the balance sheet. Continuing to reduce the balance sheet is a form of tightening. This could put pressure on the Australian and New Zealand Dollars. However, the AUD/USD and NZD/USD could rally if the minutes show policymakers discussed stopping the reduction of its balance sheet.
This article was originally posted on FX Empire
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