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AUD/USD and NZD/USD Fundamental Daily Forecast – Boosted by Positive Developments in China, Aussie Traders Prepare for CPI Report

The early trade suggests the positive developments in China and the rebound in the global equity markets will be the news driving the price action early Tuesday. Continued strength in the U.S. equity markets will also be a positive for the Aussie and Kiwi because it will indicate increasing demand for higher-yielding assets.
James Hyerczyk
AUD/USD and NZD/USD
AUD/USD and NZD/USD

The Australian and New Zealand Dollars are trading higher early Tuesday as investors shrugged off stock market volatility and shifted their focus on positive news from China.

At 0640 GMT, the AUD/USD is trading .7090, up 0.0033 or +0.47% and the NZD/USD is at .6550, up 0.0029 or +0.44%.

The Aussie and Kiwi are being helped by mostly positive markets in Asia. The catalyst behind the rebound is a recovery in mainland Chinese stocks following comments from the country’s securities regulator.

According to reports, the rally in the mainland Chinese stock market started after the country’s securities regulator said it would improve market liquidity and guide more long-term capital into the market.

The China Securities Regulatory Commission reversed earlier weakness after it said it will encourage share buybacks and mergers and acquisitions by listed firms, reduce unnecessary interference in trading, and create a level playing ground for investors.

Additional Tariffs

In other news, on Monday, the Aussie and Kiwi reversed earlier gains after a Bloomberg News report that said the United States is preparing new tariffs against all remaining Chinese imports if trade talks between Presidents Donald Trump and Xi Jinping fail to reconcile the ongoing trade dispute.

Australian Building Approvals Rebound

Earlier today in Australia, building approvals rebounded modestly in September, partially recovering some of the steep falls recorded in August.

According to the Australian Bureau of Statistics (ABS), approvals rose 3.3% to 17,081 in seasonally adjusted terms in September, coming in marginally below the median economist forecast that was looking for a larger increase of 3.8%.

August’s decline, originally reported at 9.4%, was revised to show a slightly smaller yet still ugly plunge of 8.1%.

From a year earlier, total approvals fell by 14.1%, cementing the view that Australia’s residential construction boom is now past its cyclical peak.

RBA Bullock Speaks

In other news, Reserve Bank of Australia Assistant Governor Michelle Bullock warned that the costs to the banks of dealing with their misconduct will “permanently impact” their profits as they are forced to change their business models.

Forecast

The early trade suggests the positive developments in China and the rebound in the global equity markets will be the news driving the price action early Tuesday. Continued strength in the U.S. equity markets will also be a positive for the Aussie and Kiwi because it will indicate increasing demand for higher-yielding assets.

During the U.S. session, investors will get the opportunity to react to a couple of reports from the U.S. The S&P/CS Composite-20 HPI is expected to rise 6.0% and the Conference Board’s Consumer Confidence report is expected to come in at 136.positive for the Aussie and Kiwi because it will indicate increasing demand for higher-yielding assets.

During the U.S. session, investors will get the opportunity to react to a couple of reports from the U.S. The S&P/CS Composite-20 HPI is expected to rise 6.0% and the Conference Board’s Consumer Confidence report is expected to come in at 136.3, down slightly from 138.4.

Later on Tuesday, we could see a drop-off in volume or even position-squaring ahead of Wednesday’s reports including: the New Zealand Building Consents report, the Australian Consumer Inflation report and China’s Manufacturing and Non-Manufacturing PMI reports.

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