AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie, Kiwi Surge on U.S.-China Trade Truce

The Australian and New Zealand Dollars gapped the opening on Monday after U.S. and Chinese leaders reached a truce in their trade dispute. The news offered relief for the global growth outlook, while turning sentiment higher for emerging markets. Trade-related currencies like the Aussie and Kiwi are especially expected to benefit from the news.

At 0610 GMT, the AUD/USD is trading .7366, up 0.0053 or +0.73% and the NZD/USD is at .6910, up 0.0027 or +0.40%. The Aussie reached its highest level since August 21 and the Kiwi was testing its high from June 25.

To recap the events over the week-end, the United and China agreed to halt additional tariffs in an agreement that keeps the trade dispute from escalating as the two economic powerhouses continue to try to close the differences with new talks aimed at reaching a permanent deal within 90 days.

According to a White House statement, President Donald Trump told Chinese President Xi Jinping during crucial talks at the G20 summit in Argentina that he would not boost tariffs on $200 billion of Chinese goods to 25 percent on January 1 as previously announced.

The Australian and New Zealand Dollars could pick up additional strength in response to last week’s comments by Federal Reserve Chairman Jerome Powell in which he hinted at a slower pace of rate hikes.

Forecast

The strong opening by the AUD/USD and NZD/USD on Monday may have been a knee-jerk reaction to increased demand for risk, but time will tell how long the optimism over the trade dispute truce will last. The next move in the currencies will likely be determined by assessment of the details by analysts. At this time, both sides can claim victory, however,

Traders should keep an eye on commodity prices. The progress on U.S-China trade relations and a weaker U.S. Dollar could provide some support to commodity prices. This could turn out especially beneficial for the Australian Dollar.

Earlier today, a report showed Australian Commodity Prices rose 14.9%. The previous report was also revised higher to 14.9%.

U.S. traders will have a mountain of economic reports to assess on Monday including speeches from four FOMC members.

The major report is ISM Manufacturing PMI. It is expected to come in at 57.5, slightly below the previously reported 57.7.

Minor reports include Final Manufacturing PMI, Construction Spending, ISM Manufacturing Prices and Total Vehicle Sales.

Looking ahead, the Reserve Bank of Australia will release its Rate Statement on Tuesday. It is expected to leave the cash rate unchanged at 1.50%.

Fed Chair Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee, but the hearing is expected to be postponed to Thursday because the major U.S. exchanges will be closed on Wednesday in honor of former U.S. President George H.W. Bush, who died on Saturday at the age of 94.