AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Consumer Price Inflation Data to Set Early Tone

The Australian and New Zealand Dollars are edging lower early Wednesday as traders brace for the release of key Australian consumer inflation data that could determine the size of next week’s Reserve Bank (RBA) interest rate hike.

On Tuesday, the Aussie and Kiwi strengthened on the back of improving risk sentiment, while the U.S. Dollar dropped to a three-week low as weakening U.S. economic data tempered expectations for the pace of future U.S. rate hikes.

At 23:00 GMT, the AUD/USD is trading .6385, down 0.0009 or -0.14% and the NZD/USD is at .5742, down 0.0014 or -0.25%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $63.24, up $0.75 or +1.20%.

The Aussie and Kiwi rose against their U.S. counterpart amid signs that Federal Reserve rate hikes are slowing the world’s biggest economy. The greenback slid into negative territory after data showed that U.S. home prices sank in August as surging mortgage rates sapped demand.

Australian Consumer Inflation Data on Tap

Australian third quarter consumer price index data is scheduled to be released at 00:30 GMT. Annual inflation in the country likely accelerated to 7% in the third quarter, up from 6.1%, according to a Reuters poll. The quarterly inflation rate likely rose 1.6%, down slightly from 1.8%.

The financial markets have all but priced in another quarter-point hike from the Reserve Bank of Australia in November, and cash rates are expected to peak around 4.3%.

Daily Forecast

The results of the Australian CPI report could set the early tone on Wednesday. A bigger than expected jump in quarterly and annual inflation would put pressure on the RBA to increase rates more than the widely expected 25 basis point clip. This could give the AUD/USD an early boost.

Weaker-than-expected CPI data would be the source of volatility since it would create uncertainty. Traders would then be forced to price in the possibility of no rate hike from the RBA. While this would be good news for the Australian stock market, it may not be favorable for the Australian Dollar.