Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie CPI Takes Heat Off RBA to Trim Rates in November
The Australian and New Zealand Dollars are trading mixed on Wednesday. The Aussie is posting a gain after a report on consumer inflation failed to convince investors the Reserve Bank would have to raise interest rates at its November 5 meeting. On the other hand, expectations of another rate cut by the Reserve Bank of New Zealand (RBNZ) on November 12 put pressure on the Kiwi.
At 09:17 GMT, the AUD/USD is trading .6873, up 0.0007 or +0.12% and the NZD/USD is at .6356, down 0.0001 or -0.01%.
Australian Consumer Inflation Still Missing
The latest consumer price index shows the Reserve Bank’s efforts to push up inflation continue to fall short. Consumer prices rose by 0.5 percent in the September quarter, lifting the annual rate of inflation by 0.1 percentage point to 1.7 percent.
The key underlying measures of inflation, however, were more subdued. The trimmed and weighted medians of inflation rose by 0.35 percent, pushing it up 1.4 percent over the year.
The RBA’s target band for inflation is 2 to 3 percent. The last time it was within that range was in the middle of last year, while underlying inflation has not been in the target band since the December quarter of 2015.
RBA under No Pressure to Cut Rates in November
While inflation remains weak, the September quarter result is marginally ahead of expectations and further eases pressure on the RBA’s need to cut interest rates next week given unemployment edged down in September.
The market’s initial reaction saw the odds of a rate cut on Melbourne Cup day slashed to just 5 percent. This helped underpin the Australian Dollar.
Daily Forecast
Ahead of the Fed announcements at 18:00 GMT, we expect to see a slightly better Aussie and a weaker Kiwi. The Fed is largely expected to cut its benchmark rate by 25 basis points. This has been priced in for a few weeks. This news is not likely to have an effect on the current movement in the Australian and New Zealand Dollars.
A dovish Fed, or one that signals at least two more rates cuts in December and March 2020, or two more next year should drive the AUD/USD and NZD/USD higher. A hawkish Fed or one that signals a pause in its easing-cycle in December or schedules none for next year, should be bearish for the AUD/USD and NZD/USD.
Traders should also keep an eye on news regarding the U.S.-China trade talks. Questions are being raised about the timing of the signing of trade deal, which some traders are making a big deal over. However, it really shouldn’t matter when it’s signed. The important thing is what’s in the agreement.
This article was originally posted on FX Empire
