AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Could Weaken if RBA Minutes Hint at Easing in October

The Australian and New Zealand Dollars are edging lower early Tuesday ahead of the release of the Reserve Bank of Australia (RBA) monetary policy minutes. The Aussie came under pressure as odds narrowed for further monetary policy easing by the country’s central bank. On September 1, the Aussie hit a two-year high, but has since retreated from this level as market pricing shifted rapidly for a cut to the cash rate to 0.1%.

At 01:01 GMT, the AUD/USD is trading .7272, down 0.0016 or -0.22% and the NZD/USD is at .6695, down 0.0005 or -0.08%.

Interest rate futures are almost fully pricing in a 15 basis point rate cut at the Reserve Bank of Australia’s (RBA) October 6 policy meeting.

The RBA last cut the cash rate to an all-time low of 0.25% in an emergency meeting in March and has repeatedly said the benefits of taking rates deeper into record territory were limited.

But at its September board meeting, Governor Philip Lowe hinted at additional policy measures to support an economy reeling from its worst contraction in almost a century.

This remark stoked speculation of further easing.

RBA Minutes Expectations

The market is now awaiting minutes of the RBA’s September 1 policy meeting due out at 01:30 GMT for clues about its future course of action.

A consensus of traders think the minutes may show policymaker discussion on any further tweaks to policy the RBA is considering.

This assessment is based on a news story in the Australian Financial Review over the weekend that said the RBA was contemplating further policy easing, including an expanded bond buying program and possibly lowering the cash rate.

New Zealand Dollar Underpinned by COVID-19 Lockdown Easing Hopes

The NZD/USD is being underpinned partly on news the country would lift coronavirus restrictions across the country on September 21.

“NZD’s outperformance can probably be partly attributed to news that the NZ Government is looking at easing virus restrictions, although we suspect the AUD/NZD underperformance played a bigger role on the flying kiwi amid selling pressures on the cross,” NAB senior Forex strategist Rodrigo Catril wrote in a note.

Short-Term Outlook

The RBA minutes could trigger a break in the AUD/USD if they confirm policymakers are looking at easing at the October 6 meeting.