AUD/USD and NZD/USD Fundamental Daily Forecast – Driven Higher by Upbeat Comments from China

The Australian and New Zealand Dollars are trading higher on Tuesday after recovering all of yesterday’s loss that was fueled by a knee-jerk reaction to the weaker-than-expected Chinese trade balance data. Although the headlines wanted you to believe that this negative report would set the tone for the week, we informed you that the data was from fourth quarter 2018, and the currencies were currently being supported by hopes of a trade deal between the United States and China.

At 0906 GMT, the AUD/USD is trading .7206, up 0.0011 or +0.10% and the NZD/USD is at .6835, up 0.0013 or +0.20%.

Fueling today’s rally is increasing demand for higher risk assets. The catalysts behind the strength is the positive start to U.S. earnings season and China signaling more supportive measures in the near term to counter slowing growth.

Aussie and Kiwi traders are also eyeing the vote on British Prime Minister Theresa May’s Brexit deal later in the session. Most traders expect May’s proposal to be defeated in parliament.

Forecast

Appetite for risk should continue to generate the Aussie and Kiwi’s upside momentum today on the back of positive comments from China. Helping to generate today’s positive tone are comments from China’s National Development and Reform Commission (NDRC) which said on Tuesday it would aim to achieve “a good start” for the economy in the first quarter, lifting hopes of further economic stimulus.

Furthermore, Chinese Premier Li Keqiang said that the government was seeking to establish conditions to help meet its economic goals for 2019, Reuters reported, citing Chinese state television.

In the U.S., traders will get the opportunity to react to the Producer Price Index report. PPI is expected to come in at -0.1%. Core PPI is expected to have risen 0.2%. The Empire State Manufacturing Index is expected to come in at 11.6 versus last month’s reading of 10.9 percent.

The reports are not expected to garner much of a reaction from traders since the Fed has already suggested it will pause in its interest rate tightening cycle.