Yahoo Finance AUD/USD and NZD/USD Fundamental Weekly Forecast – Topping U.S. Yields May Fuel Counter-Trend Rallies
The Australian and New Zealand Dollars finished lower last week, but the selling pressure was lighter than previous weeks. After weakness early in the week, the Aussie settled down to trade sideways-to-slightly higher. The New Zealand Dollar’s low was made at mid-week.
For the week, the AUD/USD settled at .7537, down 0.0042 or -0.55% and the NZD/USD finished at .7018, down 0.0066 or -0.93%.
The early selling pressure was fueled by continuing concerns over rising U.S. interest rates which made the U.S. Dollar a more attractive investment. Essentially, investors have been bullish the U.S. Dollar because of the divergence in monetary policy between the U.S. Federal Reserve and the Reserve Banks of Australia and New Zealand.
In economic news, the U.S. Federal Reserve kept its benchmark interest rate unchanged as widely expected while acknowledging that inflation was rising. It did not offer any hints as to the number of additional rate hikes later this year. However, most traders expect at least two more, including one at the Fed’s June meeting.
On Friday, the U.S. government released disappointing non-farm payrolls data. The headline number came in lower than expected. The unemployment rate fell to an 18-year low and weak average hourly earnings raised concerns over the pace of future
In Australia, the Reserve Bank left interest rates unchanged at 1.50% as widely expected. It monetary policy statement essentially reaffirmed the central bank was in no hurry to raise rates.
The Australian Trade Balance came in higher than expected at 1.53 billion. The previous figure was revised higher to 1.35 billion. Building Approvals also exceeded expectations at 2.6%. The previous figure was revised higher but still came in at -4.2%.
The New Zealand Dollar was underpinned by a solid employment report. The Employment Change rose more than expected by 0.6%. However, the previous report was revised lower to 0.4%. The Unemployment Rate held steady at 4.4%. Milk Prices fell with the GDT Price Index coming in at -1.1%.
Forecast
This week’s price action will be influenced by a slew of economic data from both sides of the pond.
As far as reports are concerned, inflation will be at the forefront once again with the U.S. scheduled to report on Producer and Consumer Prices on Wednesday and Thursday respectively. Several Fed speakers are also on tap including Fed Chair Jerome Powell on Wednesday at 1915 GMT.
Investors will also get the opportunity to react to Australian Retail Sales and the Annual Budget Release.
After a report on New Zealand Inflation Expectations, investors will get the opportunity to react to the Reserve Bank of New Zealand’s Official Cash Rate, its Monetary Policy Statement, Rate Statement and Press Conference. RBNZ Governor Orr is also scheduled to speak.
Treasury yields may have topped out at least temporarily so we could see some movement to the upside in the Aussie and Kiwi this week. The move will likely be position-squaring and short-covering adjustments.
The wildcard this week will be appetite for risk. Traders aren’t sure how stock market investors will react to the U.S.-China trade talks, which went nowhere as expected, and the U.S. decision on whether to walk away from the Iran nuclear deal.
This article was originally posted on FX Empire
