AUD/USD and NZD/USD Fundamental Daily Forecast – Firm on Weaker U.S. Dollar, Uncertainty Over Government Shutdown

The Australian and New Zealand Dollars are trading higher shortly before the U.S. opening amid general weakness in the U.S. Dollar. The lack of clarity over the U.S. government shutdown is driving down the U.S. Dollar, helping to underpin the currencies.

At 1249 GMT, the AUD/USD is trading .8005, up 0.0023 or +0.29% and the NZD/USD is at .7301, up 0.0028 or +0.38%.

Rising U.S. Treasury yields may be limiting gains, but increased demand for risky assets and commodities may be helping to support the Aussie and Kiwi. All three major U.S. stock indexes are trading lower in the pre-market, but they are off their lows. Copper is trading 0.69% higher.

Forecast

There are no major economic reports today in the U.S., Australia or New Zealand so the price action is likely to be driven by fresh U.S. political developments over the government shutdown.

Over the week-end, the Senate failed to strike a deal to break an impasse before the work week starts in Washington.

On Monday, Senate Majority Leader Mitch McConnell will move to advance a stopgap spending bill at 1700 GMT, he said Sunday night, but Senate Minority Leader Chuck Schumer objected as Democrats still had not seen enough progress in talks on issues like immigration to move forward.

Additionally, according to CNBC, speaking on the Senate floor Sunday night, McConnell called for an end to the shutdown and outlined what appeared to be assurances to Democrats, who have nearly all opposed the short-term GOP proposals to keep the government running. McConnell has pushed for a bill to fund the government through February 8, which House Republicans also largely back.

Volatility could return to the markets today if a decision is reached to fund the government until at least February 8 or 16. Otherwise, investors are likely to focus on the movement in the U.S. stock and Treasury markets.

Rising stock prices will indicate demand has returned for risk assets and this could help drive the AUD and NZD higher. However, rising Treasury yields are likely to put a cap on any sharp rally.