AUD/USD and NZD/USD Fundamental Daily Forecast – Economies in Good Position to Benefit from Vaccine

The Australian and New Zealand Dollars are trading mixed, but momentum is clearly to the upside on Tuesday as investors continue to see the benefits of a coronavirus vaccine outweighing the global spike in COVID-19 cases and its potential negative impact on the economic recovery.

At 10:47 GMT, the AUD/USD is trading .7327, up 0.0006 or +0.08% and the NZD/USD is at .6900, down 0.0006 or -0.08%.

RBA, RBNZ Moves Should Payoff Big if Vaccines are Successful

The early price action shows the Aussie holding on to overnight gains against the greenback, while the Kiwi reached its strongest in more than a year as investors scaled back bets for additional rate cuts.

The recent moves by the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) were necessary steps to shore up their respective economies. They are probably in the best position to take advantage of the growth expected if the coronavirus vaccines prove to be effective.

If you recall, earlier in the month, the RBA cut its official interest rate to 0.10 percent from 0.25 percent and announced a quantitative easing program of $100 billion. RBA Governor Philip Lowe said at the time that the actions were taken primarily to lower the cost of borrowing to stimulate the economy.

Additionally, the RBNZ kept interest rates on hold at 0.25% and introduced a new monetary policy tool to encourage more loans by reducing borrowing costs for banks, which matched market expectations. With these moves, the central bank may have signaled it doesn’t need to cut interest rates to negative in March 2021, which many traders had priced in.

RBA Central Bank Ready to Do More, Coronavirus Containment the Key

Australia’s central bank is ready to provide yet more policy stimulus if needed after cutting rates to record lows, a pledge that may be tested given the latest outbreak of coronavirus in the country.

Minutes of the Reserve Bank of Australia’s (RBA) November 3 policy meeting released on Tuesday showed the bank’s Board felt taking interest rates negative was not “sensible” and any further action would involve increased bond purchases.

The Board had decided to cut its main cash rate by 15 basis points to just 0.1% and launch a new bond buying program that would see the bank scoop up A$100 billion of longer-dated debt in six months.

“The focus over the period ahead will be the government bond purchase program,” the minutes showed. “The Board is prepared to do more if necessary.”

Much depended on how the country fared in containing the coronavirus, with its relative success so far leading to a better outlook than feared a few months earlier.

However, the November policy meeting came before a fresh outbreak of the virus in the state of South Australia which threatened to chill consumer sentiment and spending.

The Board emphasized that monetary and fiscal stimulus would be needed for a considerable time and pledged not to raise interest rates for at least three years.

For a look at all of today’s economic events, check out our economic calendar.