AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Dips Slightly on Lower Building Approvals

The Australian and New Zealand Dollars drifted lower on Monday as investors continued to price in the possibility of a rate cut by the Reserve Bank of Australia in October and the strong probability of a rate cut by the Reserve Bank of New Zealand at its next monetary policy meeting on August 6.

On Monday, the AUD/USD settled at .6901, down 0.0010 or -0.14% and the NZD/USD closed at .6632, down 0.0007 or -0.11%.

Economic News

In Australia, new home sales ticked up in the June quarter, the first quarterly improvement since December 2017 and an early sign the market for new homes may be stabilizing, according to the HIA New Home Sales report.

“The small improvement in sales in the June quarter suggests the decline in new home sales that has been under way for more than a year, has started to ease,” said HIA’s chief economist Tim Reardon.

“Two interest rates cuts, a tax cut and repeal of regulatory restrictions will encourage increased activity in the home building market. These measures, combined with ongoing stable population and employment growth should see new home sales improve toward the end of the year.”

New home sales over the year to June fell by 12.4 percent with all markets recording a sharp drop in transactions amid a nationwide slowdown in the construction market fuelled by tight lending and earlier regulatory measures.

Reardon also said, “The upside is that the market now faces more consistent and appropriate regulatory settings across the economy which should, in turn put a floor under the market downturn.”

He also added, “The decline in dwelling prices over the past 18 months appears to be easing which, combined with ongoing wage growth and record low interest rates, has left affordability at its best level in two decades. These positive developments are good news for market confidence in the second half of 2019.”

Australian building approvals dropped by 1.2 percent in June as a fall in apartments caused approvals to resume their downward trajectory after a brief respite the previous month. Approvals for private sector houses rose 0.4 percent on a seasonally adjusted basis, but the “other dwellings” category that includes apartment blocks in townhouses fell 6.5 percent.

Over the 12 months to June, total building approvals for dwellings fell by 25.6 percent, the Australian Bureau of Statistics said on Tuesday.

The result missed consensus forecasts that approvals that follow May’s 0.3 percent rise with a 0.2 percent increase in June, but just about met the most pessimistic economist expectations.

The Australian Dollar dipped slightly on the news.

Daily Forecast

Aussie traders are busy positioning themselves ahead of Wednesday’s release of a report on consumer inflation. An extremely weak report could force the RBA to cut rates at its August 6 meeting. Going into the report, most investors expect the central bank to pass on an August or September rate cut, but to trim its benchmark rate on October 1. Nonetheless, traders should note that moving forward, policymakers will be “live” at every policy meeting.

In the U.S. on Tuesday, traders will get the opportunity to react to reports on Core PCE Price Index, Personal Spending, Personal Income, S&P/CS Composite-20 HPI, CB Consumer Confidence and Pending Home Sales.