AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Weakens on December Retail Sales Slump

The Australian and New Zealand Dollars are edging lower on Thursday following the release of weaker-than-expected economic news from Australia. New Zealand is on a bank holiday. Due to the thin trading conditions, the Kiwi is falling in sympathy with the Aussie. Both currencies are trading weaker despite rising demand for risky assets.

At 09.59 GMT, the AUD/USD is trading .6742, down 0.0003 or -0.05% and the NZD/USD is at .6463, down 0.0012 or -0.19%.

Australian Retail Sales Pressured by Bushfires

Australian retailers suffered their worst month in nearly 2-1/2 years in December as shoppers were discouraged by bushfires that blazed along the south-eastern coast of the country and stoked smoke haze over the biggest cities of Sydney and Melbourne, according to Reuters.

Retail Sales dropped 0.5% in December, the worst monthly performance since August 2017, to A$27.77 billion ($18.75 billion) when economists polled by Reuters had forecast a 0.2% fall. Figures for November were revised higher to show a 1% gain.

Australian Trade Surplus Slumps in December

Australia’s trade surplus shrank to $5.223 billion in December, a drop of $295 million on the surplus in November 2019.

In seasonally adjusted terms, exports rose 1.0 percent to $41.29 billion for the month and imports were up 2 percent to $36.07 billion, the Australian Bureau of Statistics said on Thursday.

Westpac economist Andrew Hanlan said the result broadly met market expectations for a surplus of $5.5 billion.

He said a narrowing trade surplus was to be expected with commodity prices moderating in the quarter, notably iron ore, which had spiked in the June quarter due to the supply shock from Brazil.

“The key surprise for the month of December was around exports. Metal ores, gold and fuels all moved in the right direction…However, we were looking for stronger gains – based on partial information and mindful of a potential pre-Lunar New Year bounce,” he said.

Daily Forecast

We’re seeing mixed price action this week due to increased demand for risky assets and lower concerns over the spreading of the coronavirus. This could lead to further short-covering.

The Reserve Bank of New Zealand (RBNZ) is universally expected to keep the Official Cash Rate (OCR) unchanged at next week’s review but will point to the uncertainties around coronavirus and how that might affect the New Zealand economy.

The Reserve Bank of Australia (RBA) is expected to cut its benchmark rate in April.