AUD/USD and NZD/USD Fundamental Daily Forecast – Chance of Fresh Stimulus from RBA Weighs on Aussie Dollar

The Australian and New Zealand Dollars are trading lower early Tuesday with the currencies still feeling the effects of disappointing Chinese economic data from Monday. Meanwhile, the fast-growing outbreaks of COVID-19 are threatening Australia’s largest cities with longer lockdowns, prompting the Reserve Bank of Australia (RBA) to say it would be prepared to take policy action to prevent an economic setback.

At 02:48 GMT, the AUD/USD is trading .7311, down 0.0024 or -0.33% and the NZD/USD is at .6986, down 0.0033 or -0.48%.

Monday Recap

The Aussie and Kiwi were pressured after data on Monday showed a sharp reduction in production, consumption and investment activity in China as new COVID-19 outbreaks in the country weighed on commodity prices.

In Australia, another surge in coronavirus cases threaten the country’s largest cities with longer lockdowns, skewing risks to the downside. Officials said the country’s second-most populous city of Melbourne would be put under curfew and Sydney reported record locally transmitted infections of the Delta variant of the virus.

The New Zealand Dollar also fell on Monday, but the not as much as the Aussie. Despite pressure from the news from China, buyers showed up to soften the landing with the Reserve Bank of New Zealand (RBNZ) expected to raise interest rates at its policy review on Wednesday.

Economists polled by Reuters expect the RBNZ to raise the official cash rate by 25 basis points from a record low to 0.50%, amid concerns pandemic-era stimulus is stoking inflation.

RBA Ready to Act if Lockdowns Threaten Economy

The RBA would be prepared to take policy action should coronavirus lockdowns across the country threaten a deeper economic setback, minutes from its August meeting showed on Tuesday.

That outcome now looks ever more likely as the Delta variant spreads, piling pressure on the RBA to delay a planned tapering of its bond buying program, or even to ease, Reuters said.

Earlier in the month on August 3, RBA policymakers remained optimistic that the economy would recover once coronavirus lockdowns relaxed. As a result, it decided to stick with plans to trim its weekly bond buying to A$4 billion ($2.94 billion), from the current A$5 billion pace.

Yet minutes showed it would also continue to review the bond buying plan as the health situation developed.

“The Board would be prepared to act in response to further bad news on the health front should that lead to a more significant setback for the economic recovery,” the minutes showed.