AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Financial Futures Traders Push Next Rate Hike into Early 2020

The Australian and New Zealand Dollars are trading mixed early Tuesday with the Aussie trading higher while posting a two-sided trade and the Kiwi trading lower while inching toward unchanged for the session.

At 0606 GMT, the AUD/USD is trading .7361, up 0.0021 or +0.29% and the NZD/USD is at .6709, down -.0006 or -0.09%.

Trade tensions continue to influence these two commodity-linked currencies. The U.S. Dollar continues to attract buyers as commodity currencies slide due to risk aversion. Commodity-linked currencies such as the Australian Dollar fell to a 1-1/2-year low on Monday and the Chinese Yuan has retreated to nine-month lows amid nervousness ahead of July 6, when U.S. tariffs on Chinese exports are due to take effect.

Additionally, the New Zealand Dollar continued to react to the dovish tone of last week’s Reserve Bank of New Zealand monetary statement which suggested rates remain at historically low levels for quite some time and that the central bank has not ruled out a possible interest rate cut.

Forecast

The direction of the AUD/USD and NZD/USD will be determined by whether today is a risk-on or risk-off day. We all know the longer-term narrative so unless there is a major change in U.S.-China trade relations, the longer-term view is likely to remain bearish. Therefore, any short-term gains fueled by short-covering and oversold conditions are likely to be limited.

Earlier today, the Reserve Bank of Australia voted to leave interest rates unchanged at the record low of 1.5 percent for the 23^rd consecutive time. This news was widely expected.

The RBA monetary policy statement was mostly unchanged from its familiar narrative. RBA Governor Philip Lowe returned to a familiar theme in his statement following the central bank’s decision to leave the cash rate unchanged today, citing soft consumer spending and high household debt as sources of “uncertainty” for economic recovery.

What the RBA essentially said in its statement is it believes Australia’s economic growth is relatively strong, just above three percent, it thinks bank regulations are helping contain housing risks right now, and that household income is growing slower than expected.

Based on these three reasons, the market doesn’t expect to see a move on interest rates by the RBA until at least early 2020. After the last central bank meeting, interest rate futures traders were predicting a November 2019 rate hike.

Additionally, “Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”