AUD/USD and NZD/USD Fundamental Forecast – September 28, 2016

The AUD/USD rose to a three-week high on Tuesday, closing at .7666, up 0.0031 or +0.40%. The NZD/USD also firmed after a two-day sell-off to finish at .7300, up 0.0026 or +0.36%. Both the Australian and New Zealand Dollars were supported by increased demand for higher-yielding assets following Clinton’s performance in the first U.S. presidential debate.

The Aussie and the Kiwi showed reliance in the wake of upbeat U.S. economic data, concerns surrounding Deutsche Bank and weakness in the commodity sector, particularly gold and crude oil.

Traders downplayed strong U.S. economic news and focused on the strength of the U.S. equity markets. U.S. consumer confidence figures rose to 104.1 – the highest level since mid-2007. It was the second straight surprise increase which may be a signal that the U.S. consumer is not be affected by the U.S. presidential elections.

Additionally, another report showed that the proportion of people believing jobs are “plentiful” also rose to a nine-year high, which offset the weakness in recent ISM surveys.

FORECAST

After reacting to the presidential debate and the strong U.S. equity markets, investors will shift their attention to commentary from U.S. Federal Reserve officials, including an appearance by Fed Chair Janet Yellen, before a House of Representatives panel on supervision and regulation at 1400 GMT. Investors want to know her views after the split FOMC vote on September 21 and get a feeling as to how close the Fed is to raising rates in December.

Several Fed speakers are on tap to deliver their messages, too.  FOMC voters Mester (hawk, dissenter), George (hawk, dissenter), and James Bullard are all capable of moving the markets with their commentary. Traders should be looking for increased volatility especially if the Fed members comment on the timing of the next rate hike.

Other events on Wednesday include the U.S. Durable Goods Orders report. Core Durable Goods Orders are expected to fall 0.5% versus a 1.3% increase last month. Durable Goods Orders are forecast to fall by 1.0% versus a 4.4% increase. This report is due to be released at 1230 GMT.

Following the durable goods report, Yellen is scheduled to testify at 1400 GMT, followed by FOMC Member James Bullard at 1410 GMT. European Central Bank President will also deliver a speech at 1430 GMT. The day wraps up with a late speech by FOMC Member Esther George at 2315 GMT on Wednesday.