AUD/USD and NZD/USD Fundamental Daily Forecast – Bulls Hoping for Weak US Non-Farm Payrolls Data

The Australian and New Zealand Dollars are edging higher early Friday as traders await the release of key U.S. labor market data. Helping to generate the upside momentum is carry over buying from the previous session in reaction to cooler U.S. inflation data and increased consumer spending in October that solidified investor hopes that the peak in interest rates was on the horizon.

At 08:24 GMT, the AUD/USD is trading .6816, up 0.0004 or +0.06% and the NZD/USD is at .6395, up 0.0023 or +0.37%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust settled at $67.33, up $0.14 or +0.20%.

US Economy and Fed Pivot Driving Aussie, Kiwi Higher

To recap, data on Thursday showed that U.S. consumer spending in October increased at its greatest pace since January and the labor market remained resilient, with the number of Americans filing new claims for unemployment benefits declining last week.

Furthermore, Aussie and Kiwi bulls were encouraged by positive comments from Federal Reserve Chair Jerome Powell on Wednesday. He said that it was time to slow rate hikes, noting that “slowing down at this point is a good way to balance the risks.”

Focus Shifts to US Non-Farm Payrolls

With the Fed’s interest rates seemingly pushing down inflation without trashing the economy, the focus now shifts to the U.S. labor market. If Wednesday’s ADP private sector labor data is any indication, today’s U.S. Non-Farm Payrolls report may show a slowdown in the number of jobs created. And that’s what the Fed wants to see.

A weaker report today and especially a rise in the unemployment rate will drive the AUD/USD and NZD/USD sharply higher.

Central Banks Must Pass Inflation Test Now:  RBA’s Lowe

Earlier today, RBA Governor Philip Lowe told an international audience in Bangkok on Friday that central banks had to pass the “test” of controlling inflation. In saying so, Lowe also conceded the Australian economy could “easily” be knocked off its narrow path back to normality after COVID-19.

Reserve Bank of New Zealand Considering Changing the Way It Makes OCR Decisions

The Reserve Bank is toying with the idea of simply voting on changes to monetary policy instead of first having to try to seek a consensus, acknowledging a danger of “groupthink” on the committee that makes those decisions.

The bank’s decisions, and the way it reaches them, have both come under growing scrutiny in the wake of ongoing criticism that it was too slow to dampen inflation pressures last year and could now be overcompensating by engineering a recession.

Daily Forecast

Today’s U.S. Non-Farm Payrolls Report, due to be released at 13:30 GMT, is expected to be a market moving event so be prepared for heightened volatility.

The Non-Farm Employment Change is expected to show the economy added 200K new jobs in November, down from 261K in October. The Unemployment Rate is expected to come in at 3.7%, matching last month’s surprise increase. Average Hourly Earnings growth is expected to have risen by 0.3%, down from a 0.4% increase in October.

The best scenario would be new jobs under 200K, a rise in the unemployment rate and lower than 0.3% wage growth. This outcome would be bullish for the Australian and New Zealand Dollars.