Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Demand for Risk Controlling Price Action
The Australian and New Zealand Dollars plunged on Tuesday as investors dumped higher risk and commodity-linked currencies in reaction to an escalation of trade tensions between the United States and China.
The selling pressure was also fueled by a steep drop in global equity markets after President Trump threatened China with additional tariffs and Beijing countered with additional tariffs of their own. This move drove investors into safe haven currencies like the U.S. Dollar, Japanese Yen and Swiss Franc and out of the risky Australian Dollar and New Zealand Dollar.
The Australian Dollar, considered sensitive to shifts in sentiment towards China, because the country is its biggest trading partner, fell to a 13-month low of .7347 before rebounding a little into the close.
Earlier in the session, the Reserve Bank of Australia released its June monetary policy minutes. The RBA said that low rates are supporting the economy and that a steady monetary policy is consistent with its goals.
The RBA also said that progress on unemployment and inflation is expected to be only gradual. Inflation is expected to remain low for some time, but pick up gradually to above 2 percent.
The central bank also said a rise in the Australian Dollar would slow inflation and growth. Finally, according to the RBA minutes, the board was concerned that tariffs could place downside risk on global economic growth.
In other news, the New Zealand Dollar was pressured by another drop in the GDT Price Index. It came in down 1.2%. Two weeks ago, it was down 1.3%.
Forecast
The direction of the Australian and New Zealand Dollars will be largely influenced by demand for risk. Look for a short-covering rally if it’s a risk-on day. Watch for further selling pressure and an extension of this week’s losses if it’s a risk-off session.
Earlier today in New Zealand, Westpac Consumer Sentiment came in at 108.6, down from the previously reported 111.2. The Current Account was 0.18 billion, better than the 0.05 billion estimate, and a big improvement over the previously reported -2.75 billion.
In Australia, the MI Leading Index came in at -0.2% versus the previously reported 0.2%.
Wednesday in the U.S. will be a big day for central bank speakers. Scheduled to deliver speeches at 1330 GMT are RBA Governor Lowe, BOJ Governor Kuroda and Fed Chair Jerome Powell. They could move the Forex markets if they discuss monetary policy. Since the Fed is hawkish and the RBA dovish, the AUD/USD and NZD/USD could weaken further if Powell delivers a hawkish speech.
Other reports include the U.S. Current Account and Existing Home Sales.
This article was originally posted on FX Empire
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